When could there be a potential reversal of negative sentiment toward gaming, both domestically and globally? Will the "wind of change come from the east" in the form of Tencent, which is increasingly beginning to "stretch its elbows" in the European M&A market? What else might the Chinese giant have in store? Let's start from the beginning
A few words about Tencent
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appTencent is a Chinese-established (headquartered in Shenzhen) multinational corporation whose business area is cutting-edge technology and the Internet, and is one of the largest of its kind in the world. More than 30% of the company's revenue comes from mobile games. Tencent is expanding its business not only through organic growth, but also through active M&A activity.
Tencent's crown jewels
Tencent has been very active in the M&A market, acquiring more gaming entities. It owns 100% in Riot Games and Funcom, among others. Tencent's other strategic holdings include an 80% stake in Supercell, 40% in Epic Games and, as has been widely reported in the Polish gaming market, 22% in Bloober Team. It has majority shares in studios such as Tequila Works, Klei Entertainment and Fatshark. However, it's not the deals related to the acquisition of the above holdings that are raising investors' hopes for the return of the gaming bull market. Last week, markets were hit by news reported via Reuters that Tencent was planning to buy a significant stake in French gaming giant Ubisoft, maker of such blockbuster games as the Assassin's Creed series. And while there is more speculation than fact surrounding this news, it has warmed the imagination of investors in both the global and Polish markets, who are hoping that Tencent will not stop in its expansionist zeal and will look favorably on companies that have fallen out of favor with investors, such as CD Projekt, Ten Square Games and Huuuge. It seems, however, that this sustained and significant reversal of the dire sentiment in the gaming market needs something much bigger than a lavish acquisition - a lavish but qualitatively and sales-successful AAA game launch. And that, at least so far, doesn't seem to be happening.
Ubisoft - the big winner?
Subsequent investment forums and stock market articles outdo each other in speculation about the potential price Tencent could offer for Ubisoft's shares in the event of a significant stake purchase. There is even talk of €100 per share (vs. €46 currently), but these are, for the time being, only speculations. However, even these were enough to make Ubisoft's share price rise more than 20% at the extreme on the day Tencent's plans were announced. It seems that investors, at least for the time being, have no choice but to follow the old rule of "buy the rumor and sell the fact," because at least for now, to paraphrase a classic, "we have plenty of rumors."
Ubisoft (UBI.FR) stock price chart, D1 interval. Source: xStation 5
The material on this page does not constitute as financial advice and does not take into account your level of understanding, investment objectives, financial situation or any other particular needs.
All the information provided, including opinions, market research, mathematical results and technical analyses published on the website or transmitted to you by other means is provided for information purposes only and should in no event be interpreted as an offer of, or solicitation for, a transaction in any financial instrument, nor should the information provided be construed as advice of legal or fiscal nature.
Any investment decisions you make shall be based exclusively on your level of understanding, investment objectives, financial situation or any other particular needs. Any decision to act on information published on the website or transmitted to you by other means is entirely at your own risk. You are solely responsible for such decisions.
If you are in doubt or are not sure that you understand a particular product, instrument, service, or transaction, you should seek professional or legal advice before trading.
Investing in OTC Derivatives carries a high degree of risk, as they are leveraged based products and often small movements in the market could lead to much larger movements in the value of your investment and this could work against you or for you. Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience, before trading, and if necessary, seek independent advice.
