Embracer Group share price nearly halved on collapsed $2 billion deal and lowered financial outlook

Embracer Group has tumbled in the stock market after releasing its report for the full year ended March 31, 2023. Here are the key takeaways from the Swedish holding company’s financial statements.

Embracer Group shares plummet after a $2 billion deal collapsed

What happened?

  • Embracer Group CEO Lars Wingefors said in the full-year financial report that “late last night, we were informed that one major strategic partnership that has been negotiated for seven months will not materialize.”
  • This deal would have included over $2 billion in contracted development revenue over the next six years. The Swedish holding company planned to allocate the money towards covering already capitalized costs for various large-budget games.
  • As a result, Embracer lowered its EBIT forecast for the new fiscal year ending March 31, 2024 to SEK 7–9 billion ($660–840 million). This is a huge decline from a previous forecast of SEK 10.3–13.6 billion ($960 million–$1.27 billion).
  • Shortly after publishing the financial report, Embracer’s stock price experienced a huge decline. Today, shares fell as much as 46% compared to the previous close of SEK 41.25 ($3.86). At the moment of writing, the company’s shares are trading at SEK 23.9 ($2.24), down 42%.

  • Embracer Group’s market cap has also fallen to SEK 28.11 billion ($2.63 billion).
  • As pointed out by the Financial Times, this is the biggest daily percentage fall since Embracer shares were listed on the Stockholm exchange in November 2016.
  • “It has been a challenging year, adversely impacted by game delays, weaker consumer demand and lackluster reception for certain notable releases,” Wingefors told investors.

Financial highlights for the full fiscal year

  • Net sales were SEK 37.66 billion ($3.52 billion), up 121% year-over-year.
  • Net profit reached SEK 4.4 billion ($417 million), up 361% year-over-year.
  • Sales of PC and console games grew 58% year-over-year to SEK 13.44 billion ($1.26 billion). Mobile revenue reached SEK 5.81 billion ($544 million), up 19%, and tabletop games revenue reached SEK 13.13 billion ($1.2 billion).
  • Digital sales accounted for 66% of Embrace Group’s total PC/console revenue. 53% of sales in the segment came from back catalog titles.

  • Dead Island 2 — 2 million units sold. Metro: Exodus — 8.5 million copies sold.
  • 221 games in the pipeline, including 165 unannounced.
  • Embracer Group’s total headcount reached 16,601 people across 138 internal studios.
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