Death Watch 2024, continued: Embracer's Downward Spiral Deepens

Embracer Group, who just last month sold a $550M acquisition for $249M, have done it again, but worse. As reported by Ars Technica:

Embracer Group has been backing away from its all-encompassing position in the games industry lately. The latest divestment is Gearbox Entertainment, the studio behind the Borderlands series it bought in early 2021 for a deal that could have been worth up to $1.37 billion to Gearbox had it stayed inside the Swedish conglomerate's grasp.

The buyer is Take-Two Interactive Software, which had previously partnered with Gearbox on publishing Borderlands and other titles. Take-Two will issue new shares of its common stock to pay $460 million for Gearbox, to be completed before the end of June this year. Embracer paid $363 million in cash and stock for Gearbox in 2021 but promised up to $1 billion more should the developer hit earnings goals over six years.

"Today’s announcement marks the result of the final structured divestment process and is an important step in transforming Embracer into the future with notably lower net debt and improved free cash flow," said Embracer CEO Lars Wingefors in a statement intended to start nobody's imagination running.

A few things leap out at me.

Death Watch 2024: Embracer Group Continues To Spiral

As predicted by me:

• Embracer will not balance their books. There's only so much more that they can cut from the operation, and still have an operation.
• Embracer's next step will be divestment: selling off the assets that they bought, probably for a lot less than they paid for them, since it's a buyers' market right now.

 As reported by PC Gamer:

A Bloomberg report says that Swedish holding company Embracer Group has reached a deal worth as much as $500 million to sell its Saber Interactive division to a group of private investors. The deal will make Saber Interactive a privately owned company, according to the report, with approximately 3,500 employees.

Embracer bought Saber Interactive in 2020 at the height of its acquisition spree. It was made the fifth operating group under Embracer's corporate structure and currently serves as the parent of numerous other studios including 4A Games, Aspyr, Beamdog, New World Interactive, Slipgate Ironworks, and Tripwire.

That's me, two for two, with two to go: only restructuring and liquidation remain. If you shorted Embracer stock two months ago, then good for you. If you doubled down on Embracer stock two months ago, then I'm sorry. I'm so, so sorry.

That $500 million figure, BTW? That's wishful thinking. Embracer paid $150 up front, with $375 million in performance bonuses to follow, and there's no fucking way they're getting all of that back in a fire sale of Saber. 100%, Embracer are losing money on this deal; they're only doing it because they have no other options, and are desperately trying to survive long enough, and reduce their own prince point enough, to be bought by someone more flush.

Just bad luck that the rest of the big players in the industry are also contracting, I guess; there will be few, if any, $70 billion Activision-style deals this year. I give Embracer six more months; nine tops.

UPDATED MAR. 15TH, 2024:

Told you so:

Embracer has sold Saber Interactive for $247 million.

[...]

Embracer originally acquired Saber Interactive for $525 million in 2020.

As expected, sold for less than half what they paid to buy. This will all be going to creditors; there's no way this is going to operating expenses. Selling Saber only bought Embracer a little more time.