Ubisoft investor wants to overthrow Ubisoft founder so Ubisoft can fire more developers

Screen with the prologue to Star Wars: A minority investor in Ubisoft has written an open letter to the board of Ubisoft expressing his “deep dissatisfaction with the current performance and strategic direction of the company” and threatening a large-scale coup against the Guillemot brothers, the founders of Ubisoft, and their backers at the Chinese company Tencent.

In the letter (via GamesIndustry.biz), Juraj Krupa of Sloakian hedge fund AJ Investments and Partners cites the delay of future installments of Rainbow Six: Siege and The Division as well as a lowered revenue forecast for the second quarter of 2024 as the reason for shareholders' anger, pointing out that Ubisoft's share price has fallen by over 40% since last year. Accordingly, Krupa wants the board to “take Ubisoft private or allow its sale to a strategic investor” who will “breathe new life into” Ubisoft's video games by implementing a series of layoffs, among other things. They are giving the board 60 days to respond.

AJ Investments is even currently negotiating with other shareholders to oust the Guillemots. They will “use the French minority law to gather enough shareholders to start a proxy fight and initiate the SALE of Ubisoft to increase shareholder value for all shareholders.” In particular, Krupa is calling for the firing of long-time CEO Yves Guillemot.

“The main reason the valuation is so low compared to peers is that Ubisoft is poorly managed in its current state and shareholders are hostage to members of the Guillemot family and Tencent who are exploiting them,” the letter said. “Management is focused on pleasing investors with above-average quarterly results rather than on a long-term strategy to deliver an exceptional experience to players.”

AJ Investments appears to be new to the business as a minority shareholder in Ubisoft. According to Krupa, “we opened our position in Ubisoft a few weeks ago and are still growing it.” However, they boast of their “extensive knowledge of the gaming industry” after being “a long-time shareholder of Activision Blizzard.”

“We cannot understand the decision-making process of current management, which is focused on releasing several average games per year that damage Ubisoft's reputation in the gamer community, rather than focusing on offering hit games within its exceptional franchise portfolio,” Krupa continues in his letter. What follows is an analysis of Ubisoft's handling of its games that, frankly, reads like a frothy forum post full of gamer comments:

“Division Heartland, which was highly anticipated by gamers, was cancelled. Skull and Bones release was not a success, Prince of Persia Lost Crown was okay but not very impressive as no one is talking about the game anymore. Rainbow Siege is doing great, yet franchises like Rayman, Splinter Cell, For Honor and Watch Dogs have been sleeping for years despite these games being loved by millions of gamers around the world. The latest release Star Wars Outlaws is expected to bring good numbers but recent reviews show that the game was not 100% ready for release even though the whole world was waiting for an open world game under the Star Wars franchise. Metacritic rating was 76% and IGN has a rating of 7/10 which we think is a pretty good rating.”

Krupa, you urbane soldier of fortune, you Machiavellian fool! Forget messing with the Guillemot dynasty – calling 7/10 a “pretty good rating” is the start of wars. Also, you forgot to mention Beyond Good & Evil 2.

The following paragraph contains some more saucy claims. Krupa believes that Tencent and the Guillemot brothers' holding company are essentially in cahoots to prevent Ubisoft from being acquired by private equity firms like KKR and Blackstone – with Tencent buying shares in the Guillemot brothers' holding company in 2022 and the Guillemots then buying up more Ubisoft shares “to prevent future acquisitions or takeovers that would make Ubisoft's operations more effective and agile relative to its competitors.”

AJ Investments believes that Tencent and the Guillemot family are keeping the stock price low so they can buy shares cheaply and eventually take full control of Ubisoft. While he doesn't say it's an intentional part of that strategy, Krupa says delaying games is “beneficial” for Tencent and the Guillemots in that regard.

Hence AJ Investments' desire to launch a shareholder rebellion. Krupa claims that minority shareholders “own about 70% of the company,” while the Guillemots and Tencent own about 25% of the shares, and that therefore “based on our discussions with other shareholders, we believe we have enough voting power to challenge Guillemots.” So what would such a takeover and change in leadership achieve? Well, what does every major strategic reorientation of a company seem to achieve these days? You guessed it, more layoffs!

“The company needs to implement significant cost reductions and workforce optimization to improve operational efficiency,” Krupa adds. “We also suggest that Ubisoft should consider selling certain studios that are not needed to develop the key IPs in the portfolio. Ubisoft has over 30 studios and it is obvious to any investor that this structure is too big for Ubisoft and its future profitability.” He acknowledges “the layoffs that Ubisoft has made in recent years, which represents a reduction in the workforce of about 10%, but that is simply not enough.”

In addition, AJ Investments wants to get rid of Ubisoft's current management and the Guillemots will stay on in an “advisory capacity” alongside a new, “more efficient” CEO. They also want Ubisoft to be taken private because “as a listed company, Ubisoft is constantly under pressure to report ever better quarterly results to satisfy investors, which could harm the strategy in the future and is hurting Ubisoft at this time as they need to think long-term to give new impetus to their exceptional franchises.”

To me, this is all a bit like Aliens vs. Predator, except the Alien and the Predator are cool movie monsters, not angry suits fighting over the biggest chunk of a billion dollar company. Good luck to any Ubisoft developers worried about the potential consequences.