Embracer sinks in the stock market after failing “an important strategic partnership” valued at 2,000 million dollars

The share of Embracer Group, one of the most important video game companies in Europe, has registered a historic collapse after announcing during the presentation of its latest financial results the failure of a six-year partnership deal valued at $2 billion. It is unknown who was on the other side of the negotiating table. Right now the action of holding company Swedish falls more than 40% and so far this year accumulates a decrease of more than 50%.

“Late last night, we were informed that a major strategic partnership that we have been negotiating for seven months will not materialize,” says Lars Wingefors, CEO of Embracer Group. “Negotiations have lasted much longer than expected […] we had a verbal commitment in October 2022. The deal included more than $2 billion in revenue over a six-year period.” Over the past few months Embracer Group has closed several partnership and licensing deals for video games and movies, but none is comparable in time and money to the one that has collapsed today.

“All the documentation was complete and ready since yesterday,” says Wingefors. Embracer Group wanted to execute the deal before announcing fourth-quarter financial results today, but at the last minute the other party backed out and the deal fell through. “It was an unexpected decision for Embracer’s management and Board of Directors,” Wingefors acknowledges. Despite this blow, the executive maintains that they will continue working to reach strategic and licensing agreements with third-party companies. “The demand for content has never been higher and Embracer Group is well positioned to meet it,” says the executive.

Wingefors acknowledges that one of Embracer Group’s ambitions remains to increase the share of games developed with external funding. In this sense, the company has recently signed an agreement with Amazon Games, which will be in charge of publishing the next Tomb Raider game, a franchise that will possibly also have a series on Prime Video. Amazon is also working on a Lord of the Rings MMO, an Embracer Group intellectual property. Furthermore, when the holding company Swede bought Crystal Dynamics from Square Enix was involved in the development of Perfect Dark for Xbox Game Studios.

The failure of the strategic agreement is coupled with the delay of several projects and all of this will have an impact over time. Embracer Group expects to close the 2023/2024 fiscal year with a net result of between 7,000 and 9,000 million Swedish crowns (600-780 million euros), which represents a substantial reduction compared to its previous forecast of between 10,300 and 13,600 million crowns (895-1180 million euros). The forecast included the benefits of the agreement that ultimately will not go ahead.