Loot boxes, "disappointing sales", and game publisher stock prices


#1

I’ve been looking at all the news and hot-take analyses around loot boxes, lacklustre new game announcements (e.g. Diablo Immortal), and the constant statements of “disappointing sales” from top franchises…

Lots of folks have been looking at the declining share prices of EA, Activision Blizzard, and Ubisoft and attributing it to all the negative news that’s been mounting up around titles like Battlefield V and Destiny 2, the negative sentiment that’s taken hold of the publishers’ business practices, and the failure in confidence of once-trusted brands like Blizzard.

But check out the charts below. The share prices just seem to track the All Share Indices. So maybe there isn’t much to read into regarding the share prices movements at all?

Anyone else looked into this and have data/insights I might be missing?

(The EA and Activision Blizzard stocks shown are listed on the Nasdaq, and Ubisoft is on Euronext)

EA, Ubisoft, and Activision share prices over the past year

FTSE, Nasdaq, and Euronext All-Share Indices


#2

Overlay it with “announcements” and “releases” and you’ll likely see some correlation.


#3

My argument is that whatever correlation there might be to anything these companies did, it is completely dwarfed by macro economic effects.

Their shares tanked because the whole market tanked.


#4

Hmmm, but that can be said for most companies. However, check what Ubisoft shares did immediately after the AC Odyssey release vs what the market did overall. There definitely seems to be some correlation there, but I do think the industry as a whole is misreading some data


#5

Do you know of techniques to isolate the performance of a company by removing the effect of the overall market?


#6

I would like to see how the share price growth rate compares to the earnings per share growth rate for the same period. A large discrepancy would likely indicate that the company’s performance was probably not the primary influence of the share price for that period.


#7

@DieGrootHammer this is your world aint it :stuck_out_tongue:


#8

Even if there is an overall drop in the market surely the bigger drop in the gaming companies means that they were affected by poor news.


#9

Maybe. There are many variables you need to isolate before drawing conclusions about why stockholders sold for the price they did, though.

For instance… the whole tech industry bled this year. Maybe if you were to compare game company stocks to the tech industry as a whole, the drop is actually in-line with the average. I’ll try and take a look at that data if I get a chance.

That said, the massive drop in Activision’s price at the start of November does seem to coincide with the announcement of Diablo Immortal and Activision’s statement that it was disappointed with the sales of Destiny 2: Forsaken.

But that doesn’t explain the downward trend since July.

What I’m asking is… how much of the stock price going down was due to negative sentiment in the company, and how much is due to the overall market being bearish?

And a follow-up: If the overall market wasn’t in decline, would the negative news coverage have hit the stock price as hard in November?

What I’d really like to see is a survey of people who dumped their stock.


#10

Sadly this goes a little beyond my realm of expertise. However, the gaming industry is more closely related to the entertainment industry but hugely influenced by the tech industry. There are a couple of companies that actually track and report on this, but the cheaper ones are like $5000 per request


#11

Yeah that’s the big issue I’ve run into… getting data quickly to work with is very pricey. I’d basically have to capture everything myself to keep things affordable and above-board.


#12

Focusing on Ubisoft, there seems to be a couple of interesting dates/points:

  • ~19 March 2018 - Trading volume went from 1.12m to 5.85m (between 12 March and 19 March)
  • Financial year ends on 31 March 2018
  • Post FY18 results the share price went from 68.52 to 102.95 in the 3 months after results were released
  • Vivendi dropping Ubisoft shares and Tencent picking most of these up (this is still ongoing and will conclude in March 2019)
  • Interestingly enough the sharp drop in share price roughly coincides with the release of “The Crew 2”
  • The second big drop/trend roughly coincides with the announcements and release of “Assassins Creed Odyssey”

#13

Thanks, those are interesting.

We’ve both used the word now, so I think it’s important to point out for anyone following the thread… These might all just be coincidences.

Correlation doesn’t imply causation, and all that.


#14

#15

Interesting. Two minutes in and I already find myself disagreeing vehemently, but let’s see what he has to say about the stock prices…

*Clarification: I agree with some of his axioms, but disagree with the examples he’s giving.


#16

A follow-up on the previous


#17

Overall, I think you’re on to something. He’s on to something. What exactly this is, and what to make of this is the hard thing.


#18

As a counter-point, here’s a view from someone HODLing Actizard stock.


#19

He’s not completely irrational; personally I don’t believe we’re going to see any of the big studios close down, but I do think we’re going to see a change in how they do business.


#20

His video on insider selling is very interesting. I would have to see how many shares these folks still hold in the company after all their sales, but it reminds me of an article I read this year from Alec Hogg about the Capitec CEO selling some of his shares in the company.

(The larger context of this was that people were suspicious of this happening during the whole Viceroy Research scandal.)

An excerpt:

I’ve become a little gun shy about drawing conclusions from the purchases by insiders of shares in their companies. The billions blown by Steinhoff’s former chairman Christo Wiese tends to have that kind of impact. Ditto that infamous R5bn share buy-back the company itself did shortly before the proverbial hit the fan.

But when insiders sell shares, the message they send us is less ambiguous. Nobody offloads stock in your own company unless you believe it is fully valued. Or overpriced. So I’m paying attention to the SENS announcement that both the incumbent and former CEO of Capitec have been selling big chunks of their holdings.