THQQF - Embracer: Split Sensitivity Analysis RemainCo Is Gutted

2024-06-02 23:23:56 ET

Summary

• Embracer had an alright quarter, with the restructuring effort driven by massive layoffs paying off for profits but at a major sacrifice of growth.
• Additionally, they plan on breaking up the business. Middle Earth and other AAA titles will be the focus of the residual business, although without Gearbox and Saber, which were excellent.
• Depending on the valuations of the spun-off elements, we'll come to a decision on what we might sell or buy based on our valuation sensitivity analysis.
• Spin-offs can be a great opportunity to get ahead of the market before price discovery kicks in. Think back to Otis and Carrier after United Technologies got broken up.
• We think RemainCo is a discount company, as the loss of major titles in Gearbox and Saber, some slated for imminent release, leaves a much-diminished property box. AAA economics are also not great, with costs up and quality down.

...

For further details see: