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Embracer shares have nosedived after the collapse of a $2 billion deal
The Lord of the Rings and Tomb Raider owner has slashed its earnings forecast
Embracer Group shares plummeted by over 40% on Wednesday after the Swedish company said a major deal had fallen through unexpectedly.
As part of its quarterly earnings report, the company said it had been notified on Tuesday night that a $2 billion partnership wouldn’t be going ahead as planned.
The company, which owns the entertainment rights for The Lord of the Rings as well as popular gaming franchises like Tomb Raider and Borderlands, said it had slashed its earnings forecast because of the deal’s collapse.
For the current business year ending in March 2024, it lowered its previous guidance of SEK 10.3 billion to 13.6 billion ($964m to $1.27b) in adjusted earnings before interest and taxes to SEK 7 billion to 9 billion ($655m to $843m).
“It has been a challenging year, adversely impacted by game delays, weaker consumer demand and lackluster reception for certain notable releases,” said CEO Lars Wingefors.
“Late last night, we were informed that one major strategic partnership that has been negotiated for seven months will not materialise.”
The company elaborated: “Negotiations have been taking far longer than originally anticipated considering we had a verbal commitment already in October 2022.
Further reading
Amazon is making a Lord of the Rings MMO for PC and consoles
The game is in development at the studio behind New World
“The specific deal included more than USD 2 billion in contracted development revenue over a period of six years. The deal would have enabled a catch-up payment at closing for already capitalized costs for a range of large-budget games, but also notably improved medium-to-long-term profit and cash flow predictability for the duration of the game development projects.
“The transaction had many of the highest rated global advisories onboard with several hundred people engaged on both sides. All documentation was finalized and ready to go as of yesterday. We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty. This decision was unexpected to the management and the Board of Directors of Embracer.”
