Ubisoft shares reversed early gains Friday after the French video game publisher announced a major strategic overhaul involving a €1.16 billion ($1.25 billion) investment from Tencent into a newly created subsidiary. The new unit will house some of Ubisoft's most valuable intellectual property, including Assassin's Creed, Far Cry, and Tom Clancy's Rainbow Six.
The stock surged as much as 12% in early Paris trading following the announcement but later gave up those gains, ending the day down 2% amid investor uncertainty around the long-term implications of the deal. The Tencent-led investment values the new subsidiary at €4 billion-more than double Ubisoft's current €1.8 billion market capitalization.
Ubisoft said the spinoff unit will "focus on building game ecosystems designed to become truly evergreen and multi-platform," a signal that it aims to reposition its marquee franchises beyond traditional console cycles. CEO Yves Guillemot said the move would help "strengthen [Ubisoft's] balance sheet" and support the development of its core brands.
The deal comes after a turbulent period for Ubisoft, which has seen a sharp decline in revenue and a series of underperforming releases. In February, the company reported a 52% year-over-year drop in third-quarter net bookings, citing weak sales across several titles. Its latest game, Assassin's Creed Shadows, released last week, has received positive early reviews and helped push shares up nearly 8% on March 24.
Tencent's involvement is widely seen as a bid to leverage its dominance in mobile and PC gaming to globalize Ubisoft's IP. The structure of the Tencent-backed spinoff is "innovative and aims to highlight the value of Ubisoft's top franchises, while also not ceding overall control to Tencent on paper," said Piers Harding-Rolls, research director at Ampere Analysis, according to CNBC. "However, to get the most from these franchises, I expect Tencent to have a stronger influence in cross-platform expansion."
The Guillemot family, Ubisoft's founders and largest shareholders, reportedly initiated discussions with Tencent in September 2024, seeking a lifeline for the company's floundering performance. According to Morningstar, the cash infusion gives Ubisoft financial flexibility equal to nearly two-thirds of its market value before the deal.
Barclays analysts noted that if the deal closes as expected by the end of 2025, it would substantially ease Ubisoft's debt position. "This operation highlights the group's significant undervaluation, which could lead to a slimming down of the rest of its business," said brokerage firm Midcap Partners.
