The end might be near for Ubisoft. The year has barely started, and it seems as though the former giant of the gaming industry is showing more signs of decline as it seemingly prepares for bankruptcy ahead of the release of
Assassin’s Creed Shadows.
In our previous article, we highlighted Ubisoft’s abysmal credit rating, rooted in troubling financial metrics such as a €1.4 billion net debt, plummeting market cap down over 85% in the past four years, and an unsustainable workforce of 18,666 employees costing an estimated €746.6 million annually.
These indicators painted a bleak picture of a company teetering on the edge of financial ruin.
Now, on January 9, 2025,
Ubisoft announced that it has appointed leading advisors to review and pursue various transformational strategic and capitalistic options to “extract the best value for stakeholders.
What does this mean?
On paper, it suggests Ubisoft has hired consultants to address the company’s strategic missteps from recent years. However, in practice, this move aligns more closely with preparations to sell off valuable assets such as intellectual properties like
Assassin’s Creed, Far Cry, Rainbow Six, streaming rights, or other goods, and possibly edge closer to bankruptcy.
This announcement comes on the heels of yet another delay for
Assassin’s Creed Shadows, now pushed from February to March. Coupled with declining sales from
Star Wars Outlaws and the cancellation of
XDefiant, it seems Ubisoft’s financial woes are far worse than initially anticipated.
Could this be the end for Ubisoft, not even one month into 2025?
First, let’s examine why this move might signal Ubisoft conceding to bankruptcy or even preparing to be sold off entirely.
A Historical Precedent
Back in 2012, when THQ filed for bankruptcy, the company made a similar move before its eventual collapse.
Just like Ubisoft, THQ knew exactly what it was doing and for whom it was doing it. The initial step of appointing leading advisors to explore “transformational strategic options” is a standard procedure for any company on the verge of a merger or asset sale. However, in Ubisoft’s case, this announcement—just as it was for THQ—serves as a signal to investors that the company is following all legal and regulatory steps before implementing drastic changes that may benefit some stakeholders but are more likely to leave others at a loss.
Bankruptcy might indeed be imminent, as Ubisoft’s announcement aligns with patterns seen in other companies before they spiraled into bankruptcy and were taken over by courts. For example, THQ, Atari, and Midway Games all made similar moves before their eventual downfall. These steps often aim to maintain a semblance of control and to prepare stakeholders for the inevitable.
So, what is Ubisoft aiming for? Looking at its announcement and the strategy to cut €200 million in costs, it seems this may be nothing more than a red herring, distracting from what are likely the company’s final days. Much like THQ, Ubisoft’s planned asset sales and cost reductions might serve to prolong operations just long enough to make it appear more attractive to a potential buyer. However, the reality is that such a relatively small cut in the face of its ever-increasing debt will do little to change the course. Bankruptcy courts may already be preparing to step in and oversee Ubisoft’s descent into insolvency.
It’s far more probable that these leading advisors have been brought on to determine, as Ubisoft’s own announcement states, the “best” way to manage this situation. That might involve minimizing losses for major stakeholders while ensuring that executives walk away with generous severance packages. THQ’s bankruptcy followed a similar pattern, where top executives exited with substantial payouts despite the company’s collapse.
The €200 million in cost reductions may, in reality, be a war chest to fund severance payouts during the impending bankruptcy.
With over 18,000 employees still on Ubisoft’s books, unless massive layoffs are announced immediately, many could be entitled to severance before the company folds. Unfortunately, it’s far more likely that the majority of employees will be left with little, while executives walk away with their “golden parachutes.”
Low Pre-Orders and Rising Debt: The Warning Signs Behind Shadows’ Delay”
Another sign that this may indeed be the case is the further delay of
Assassin’s Creed Shadows from February to March.
Why is this relevant? It reveals a lack of confidence in the product. More worryingly, the announcement of this delay came just one day before the advisors’ appointment was made public. This suggests that pre-orders for
Shadows were so low that Ubisoft already knew the game wouldn’t be able to save it from mounting financial debt.
In retrospect, based on the poor sales of
Star Wars Outlaws and the recent cancellation of
XDefiant, it’s estimated that Ubisoft would have needed Assassin’s Creed Shadows to generate at least €1 billion in sales. This level of revenue, achievable by only a handful of games in such a short timeframe, would have been necessary to keep them afloat long enough to secure additional credit and temporarily manage their liabilities.
However, Ubisoft’s actions indicate that the numbers aren’t showing this potential.
If there were no concerns about the pre-order numbers for
Assassin’s Creed Shadows, this delay might not have occurred. Delaying a major release dents investor confidence and impacts stock prices—two things Ubisoft cannot afford to jeopardize right now. Yet, the delay was announced, further confirming that cracks are growing within the company and that it is preparing for an inevitable collapse.
In our last article, we estimated Ubisoft’s credit rating to be CCC—an abysmal rating indicating that bankruptcy is imminent unless drastic changes occur. These drastic changes could include layoffs, asset sales, game cancellations, and severe operational restructuring. However, Ubisoft seems to have taken its first steps toward accepting bankruptcy instead of implementing these changes, which might have given the company a fighting chance.
Why is that?
The answer likely lies in their crippling debt. With no feasible way to offset liabilities through the release of new products, Ubisoft has effectively trapped itself in a cycle of underperformance. They are unable to generate enough revenue to move from the red into the black. As a result, it seems their best course of action now is to prepare for the inevitable by stabilizing operations just long enough to ease the transition into bankruptcy proceedings.
Buyout, Bankruptcy, or Bust: Ubisoft’s Slim Chances for Recovery
But let’s explore whether Ubisoft could still save itself.
If we assume Ubisoft is not actually preparing for bankruptcy—what are its options?
A buyout or asset sale would likely be the next step, but even selling some of its assets wouldn’t cover the cost of its debt. As of now, Ubisoft’s entire valuation is estimated at around $1.6 billion. This means Ubisoft cannot expect to sell its entire Assassin’s Creed franchise for anything near $1.6 billion, as a potential buyer might instead purchase the entire company outright for the same price.
Imagine this: a franchise that once earned billions is now valued at less than its peak earnings during the release of
Assassin’s Creed Valhalla, all due to Ubisoft’s financial chaos.
Because of its massive debt, Ubisoft would likely have to sell its most valuable franchises, such as
Assassin’s Creed, for a fraction of their worth. Selling assets is therefore not a viable option, as any other assets up for sale would be viewed by potential buyers as far less valuable than the price required to keep Ubisoft afloat.
In short, any attempt at asset sales would leave Ubisoft unable to fund the production of a game capable of pulling it out of the red. Its low stock price and poor valuation have effectively trapped the entire company.
To illustrate, if a chicken lays valuable eggs and the farmer wants to sell the eggs for $30, but the chicken itself is valued at only $10 because of the farmer’s debt, a smart buyer would simply purchase the chicken. This is the dilemma Ubisoft faces, and Chinese company Tencent, an Ubisoft investor that may be poised to buyout the entire operation, undoubtedly understands this.
Rumors of a Tencent buyout persist, but as we mentioned in our previous article, Tencent would benefit more from letting Ubisoft enter bankruptcy proceedings and acquiring its intellectual properties at auction without inheriting its debt.
So, what other options does Ubisoft have?
Layoffs and restructuring could be considered, but it’s likely too late for that. With over 18,000 employees, a significant restructuring and layoff strategy would take at least one to two years to yield financial benefits. However, Ubisoft’s mounting debt and poor investment credit rating make it unlikely that they can secure the financial stability needed to implement such long-term strategies.
In fact, layoffs and restructuring could harm investor confidence further, especially as Ubisoft currently has only one upcoming product,
Assassin’s Creed Shadows, that might appeal to gamers—and even that title seems to lack the anticipated enthusiasm.
How about a buyout?
Could Tencent or another company purchase Ubisoft outright? At a valuation of $1.6 billion, Tencent could afford to buy the company. However, Tencent would also inherit 18,000 employees and Ubisoft’s debt, not to mention other obligations such as financial incentives tied to
Skull & Bones with the Singaporean government or other undisclosed liabilities.
While Tencent could simply lay off employees post-acquisition, taking on such liabilities may outweigh the potential benefits. Tencent might prefer to wait for Ubisoft to enter bankruptcy proceedings, allowing them to bid for key franchises during an auction without incurring these additional costs.
Of course, in such a scenario, Tencent may have to compete with other companies for these assets, but the risks and costs would be far lower than buying Ubisoft outright.
As it stands, we estimate there’s a 60% chance that Ubisoft is proceeding with a bankruptcy strategy, a 30% chance of an acquisition or merger, and only a 10% chance of restructuring recovery without bankruptcy. Ubisoft seems to be sailing its last voyage this year, hitting an iceberg in January, sinking slowly through March, and potentially drowning entirely by June or July, when bankruptcy proceedings could reach their conclusion.
