Embracer Group — the owners of huge IPs including The Lord of the Rings, Tomb Raider, and Borderlands — has seen its shares drop by a whopping 39.28% in the past day after it announced the surprise "negative outcome" of a potential $2 billion contracted development deal.
The drop occurred this morning following the candid public statement from the company as a part of its quarterly sales report. In this statement, the Swedish company explained that the deal would have enabled a catch-up payment for "already capitalized costs for a range of large-budget games" and would have improved future profit predictions on games currently in development.
However, "late last night" the company was surprised to have "received a negative outcome from the counterparty," the statement continues. Embracer Group has since adjusted its earnings on the year from SEK 10.3 billion to SEK 13.6 billion down to SEK 7 billion to SEK 9 billion.
As noted on Twitter by Dr. Serkan Toto, CEO of Japan games industry consultant company Kantan Games, the deal falling through had an almost immediate impact on shares in Embracer. Toto suggests that investors may have seen the statement as an excuse for disappointing performance:
At the time of writing, shares are down by 45.21%. The company has stated that its "ambition is still to increase the share of externally funded game development" and it expects to deliver higher net sales in FY 2024/25 and FY 2025/26 with "a strong pipeline of highly anticipated games based on our iconic own and licensed IP".
For a reminder of all of the IPs that Embracer currently owns, check out our complete round-up below.