Ubisoft’s $1.25B Tencent Bailout: A Masterclass in Corporate Defense—or Malfeasance?

[Music] Ubisoft. So I hell have frozen over. I am now agreeing with a Kotaku headline where they say Ubisoft is getting a $1.25 billion bailout from 10 cent which is 100% true. That is exactly what's happening right now. So basically what they're doing is they're spinning off their biggest franchises including Assassin's Creed, Far Cry, Rainbow Six Siege into a separate sub subsidiary with a $1.25 25 billion investment from Chinese conglomerate 10 cent. This also allows the Gilibon family to maintain control of the publisher despite struggles and creator share price. They were on a conference call where they basically said there will be a dedicated management team under the supervision of the board which will all be controlled by Ubisoft's CFO and CEO. And so that is complete [ __ ] [ __ ] Anyway, so Ubisoft will continue to manage the consolidated entity. All right, my take

on this. As you can imagine, I am not very happy right at this moment. This is exactly what I've been saying for the last [ __ ] three years since they did this deal with Tencent to begin with, is that this deal with Tencent originally for the $300 million was to basically secure their ability to do whatever the [ __ ] they wanted with the company despite the shareholders and the employees. And this is a very very complex deal that's not closing till the end of the year. So we don't know a lot of details. And in the email they said that we will hash it out in practice is what they said which is code word for we are [ __ ] anybody that we want to [ __ ] with to get what we want. So this is a lot of speculation because we really don't know exactly what will happen particularly with the leftovers right which we'll call the remainder of the company that is leftover. So here's the good news. Here's the good news. I'm going to start with the good news because there is good news on this. First of all, this ensures that we will not see massive layoffs at Ubisoft at least in the short term, right? Like

they have secured the money that they need in order to continue. So, this is in some ways good for the employees of Ubisoft. Also good for the customers that we will at least get one or two iterations on some of these big franchises, which is great, right, for the consumer. I think this is also really good for Tencent because clearly Tencent's in this for the long game. This is what I keep hearing from investors over and over again, like they kind of know what they're doing. They are very sophisticated in their approach. And so they're basically doing this to ultimately buy this company in the end when Eve realizes that he has completely [ __ ] this thing up. He needs to let go, right? Yeah, dude. They bought this thing for $80 a share the last time, you know, for $300 million. $80 a share. It's like a 10 or 12 now or something. So they don't give a [ __ ] about the money is what they have like more money than they know what to do with. And so this is probably a long game to get this thing. So and this deal is like a masterclass by the way and to Eve's credit and his team of navigating foreign investment laws, right? So they

are basically monitoring this for the legal thresholds of ownership and control so they don't go against French law. Right? The French like regulatory system is relatively ownorous and so they are doing everything they can to avoid getting problems with the government. And in some ways, as I've been saying, it's kind of achieves business objectives for both companies, right? Both Tencent and Ubisoft. The bad news, and there's a lot of it, right? This is just kicking the can down the road, right? They're just not doing what they need to do. They're postponing the inevitable, which is either a sale or a complete restructuring of this company, right? And the management. They are basically precluding any other company from ever acquiring this thing, right? It's basically 10 cent or nobody, right? So the asset is not valuable only to Tencent now because of of their ownership. It's the same leadership, same problems, right? They there's nothing changing in terms of how they're managing this company. They're they don't even talk about it, right? They're just running this company into the ground. And the big thing is that the current shareholders get absolutely rat

[ __ ] Like they are totally screwed in this particular thing. Like they have no value or say it seems in this transaction, which is part of the reason I didn't like the 10-centent deal to begin with. And employees with shares are totally [ __ ] too, right? Because those shares are going to continue to go to zero, right? And the debt holders will maybe get screwed, but unclear. They may get paid back. You know, it is it really depends. That that's really unclear at the moment. Hold up. Hold up. That's if I'm understanding this correctly. The shareholders of Ubisoft are about to lose their most valuable assets and it's being acquired by a subsidiary, which means they should be compensated in some way, right? Like they're not going to get zero. I got to get something out of this, right? No, you can't. That Eric, that is not possible. That is ab That is actual robbery. If you're telling me that they basically just broke into the house, stole the crown jewels, and are now walking away, that's got to trigger a million court cases. There's no way. There's no way there can't be litigation if that's the case. That's unre. What do I get? Ubisoft [ __ ] mobile now. Is

that what I get? I get ketchup. Let's relax. Green panda. But so so what your safe word mean? Yeah. So, so what was written by some of the coverage on this, but this is also very unclear, I want to be clear, is that they likely are reviewed and consulted with the French government, the French direction, general, whatever DGT in advance in order with the beret. It's more convincing in order to get like the not approval for this, but they kind of implied that they the government's already looked at this and agreed upon it. Otherwise, yes, they would be worried about getting lawsuit. First of all, this [ __ ] would be so [ __ ] illegal in the US. Like, this could never happen in the US. Like, the $300 million deal could have never happened in the US. Like I said last time, like this is [ __ ] criminal [ __ ] like in in most countries like in the free world. Where's the up? What in capitalism? You mean? Yeah. Yeah. Anybody that Yeah. Anybody with

capitalist systems. So, so here's the rant. Here's the real rant on this, right? This is like corporate malfeasants, right? like like he's had nearly 40 years of power and he's still orchestrating every major deal to ensure that the family stays at the helm. Like this is what he's doing. Can I get the HBO series out of this? Is this our rather secession in French rather than exploring like a a clean sale or a merger or a restructuring that actually could benefit shareholders, they have basically structured these defensive maneuvers over the last few years. first with Vivendi when Vivventi tried to acquire them and now with Tencent and so basically in essence Eve is like subordinating shareholder values and employee welfare ultimately like longer term in order to like maintain his personal legacy and control and obviously I've been saying and very critical of him over the years is that he's not doesn't know how to manage this company. So Bobby Cotch, I think, was in the exact same position to some degree

in this where he was went through a really tough go, right? And when he was confronted with like these impossible odds, he did what was best for the shareholders and the company and he sold it to Microsoft, right? Rather than like suffering through this [ __ ] right? Even he who was an egoomaniac narcissist knew that his time was over, right? And in a podcast, he actually said that he was worried about like other competing things. But Eve has become like the Gaddafi of the gaming industry, right? He wants to hold belong to power at all costs. He's like Franco of Spain, the Emperor Palpatine, dude. Darth Cidius himself, you know? He's like, he's playing this long game to stay in power. He's like the Julius Caesar, dude, of gaming industry. He's like dictator for life, you know? It's like crazy. Like long live Caesar. Are you British in this analogy? I don't know. [ __ ] heave, dude. Just let it go, you know? Like anyway, that's all that's all I got for this. It's just it's so mindblowing that you know like again in in what I said earlier with read the room. It's

like why don't you elegantly craft this as a you could say hey you know we're getting out you set up the shareholders you set up like players and you're like this is you know you're John Elway to do use an NFL term. Well, actually, they're not even winning right now, so I can't even use that analogy. But like, this is like so power hungry, power grabby, and again, if I'm a shareholder, not to [ __ ] on what's left, but like honestly, what is left? Like, what is left? What is the value of those shares? If I'm a if I'm an employee that you convince to go, if I'm an employee, does my stock change to new subsidiary if I work on Do you think Assassin's Creed? Yeah. Okay. I mean, do they not? I I guess I don't know. I assume if they do this type of stuff, they wouldn't give stock. Like, that doesn't sound like a company that gives RSUs. All these details are unknown at the moment. So, it is possible that the employees will get shares of the Duco like you would hope they would anyway, but we don't know. The stock has gotten

crushed again. I mean, it's already so crushed like you know to be clear like they're giving $1.2 billion for a company that's only worth 1.5 billion, right? So they're literally I think they're getting a 25% ownership. So they're like I think paying four times or three times what the company's actually worth with this investment. 10 cent again. Tencent could give a [ __ ] about the money. It's just about the long game. Don't French startups lose then? Because if I'm a French startup and eventually one of my outs is going to be to IPO. If I'm an investor, I'm looking at this. I really need to build this into the price of every single French company that basically I really can't sit on the board. We don't own it and I could be robbed at any moment. Right? This depresses the whole French ecosystem. Anybody that starts a company in France has got to be out of their goddamn mind. Like there's just no reason to ever I don't what [ __ ] Voodoo. You guys are nuts. Absolutely nuts. Just can they list and elsewhere

though? Can they list on like the New York Stock Exchange Monaco? So, so I guess we need a lawyer, but like can they be governed by another? Like, why would you always just I'd rather be a Nicaragua, dude. I'd rather be a Nicaragua than this [ __ ] dude. [ __ ] This is crazy. This is so crazy. Oh my god. I've never seen anything like founder friendly. To me, it sounds like founder friendly. No, no, that's true. That's true. Employer friendly. You should start a company in France because it's incredibly founder friendly. You can do whatever. Even if you're public, do whatever. just sell assets and then leave a corpse to the investors. But all the upside is gone, right? All the upside is gone. All the shareholder value that you're trying to create, all the like it's gross. It's criminal, you know, in its own way. Maybe this is a dumb question, but why not do it in reverse and keep I guess they have to have a new company to get the new valuation. Why wouldn't you get rid of the spin-off is all mobile and all the other stuff and you keep the crown jewels in the original one? This is why it's so criminal in a way is that if you

own too much of a company within France then like all kinds of regulatory problems happen and so by doing this with a subsidiary it circumvents those rules and so if they were yeah and so like it's the change of control provisions or something within the with the government is so rather than doing the getting a controlling interest which then would create a huge problem for them from the France government they did this to circumvent it. Ah, okay. So, this is their sneaky Yeah. side quest solution to do the spin-off. The spin-off deal basically avoids triggering the foreign control concerns from the French government. That's how they could have tens. So, so basically this can never be sold again because no one's going to ever want to give the multiple to buy something. So, it's going to be 10 cents for life. I guess that's what you're saying. Well, they're prohibited from selling it in 5 years. So, they have 5 years to figure out what to do with this thing. Anyway, we'll get more details over time, but I'm actually at the point where I'm not covering this thing anymore because it's so [ __ ] dastardly. Like I it's just not even worth it, right? Really, like I'll cover

the games, but these guys are just despicable. Like absolutely despicable. And Tencent's not despicable. I want to be clear here, Tencent's being brilliant at this thing. Like they're just like the puppeteers, you know, and they just are doing whatever it takes in order to get as much ownership as possible. Like they're doing the smart thing. So, so what is their angle though, right? Are they vultures just waiting for the animal to die and to like eat it? Basically, picking up IPs. Yeah. I mean, they pick up some amazing IPs that may or may not have any valuable. They're feeding the brother's drug to like have them OD and then like take take like all their assets. Like this is also [ __ ] from Tensson's perspective, right? I'll give you example. I'll give you example. So, they spent 300 200 to 300 million. I can't remember exactly when for that initial investment in order to get access to some of the IPs for mobile, right? And what I'm hearing from sources is that those games that they are building for Ubisoft, they're not even focusing on those. Like they don't give a [ __ ] if those games ever come out, right? It's not a focus, right? So

again, they are in the long game, dude. They are like long-term on these type of investments and keeping these guys alive and building up their ownership and circumventing all the rules and regulations around what French have done. And so maybe through this subsidiary they'll be able to actually acquire those assets that are the most valuable ultimately and the French government is going to be screwed too, you know, like I don't [ __ ] know. You don't know, you know? But like the 10-centent guys are brilliant. What's interesting is so remember how we talked about NI actually divesting from Western Studios recently and you know NI going through that cycle of you know we want to buy Western now we want to get out of it. So, is Tencent's idea here kind of what NEIS was a year ago, which is maybe getting some of these AAA teams would allow us to expand, you know, in Western markets. Do you think that's kind of at play? Because you just said that they don't give a [ __ ] about the mobile like that Assassin's Creed game didn't launch. No. The game theory here could be that they want to just acquire the

licenses, right? And they want to develop the games themselves and shut everyone else down, right? That could be the endgame, right? Yes. which actually makes more sense because then they can have teams of thousands of thousands of people building out Assassin's Creed in a more modern way and then you know Ubisoft just goes away you know they just expire you know so rather than do a licensing situation are these licenses worth it though like yeah Genchin Impact Assreed let's go baby I need to understand who's going to make the movies I mean the division movies and like someone call Michael Fastpender on retainer I think we're done. But I just I want to say much respect to the French founders. Very much like visiting Paris. I don't agree with anything that Crest said about France. France Paris or anything. I'm just kidding. Dude, if you if you have a multi-billion dollar company in France and you have to work like 30 hours a week, [ __ ] dude. You're living large, dude. What am I I'm just complaining. I'm just like I'm jealous. [ __ ]

jealous. You know, like these voodoo guys, the the Homa, like they're living large. They don't give a [ __ ] right? Like good, you know? Yeah. We love France on that. Banana Republic. Oh god. It's not a Banana Republic. It's past our due date. Yeah. All right, everyone. Thank you and see you next week. [Music]