Deals just don't fall through, until, apparently, they do. This is the kind of explanation that Embracer Group just gave about a $2 billion deal that, for some reason, fell through and resulted in the company share prices dropping by nearly 50% in a little over 24 hours.
The Swedish company, which made waves in the past few years by acquiring all of the western subsidiaries of Square Enix and Gearbox Entertainment, confirmed that it recently experienced a marked plunge in shares. The drop, which is a staggering 39.28% within 24 hours, came in the wake of an unexpected result of a potential $2 billion deal.
The company had hoped the announcement of the said deal would generate enough cash flow and boost profit forecasts for games currently in development. However, a late-night revelation of the deal's failure brought an unfortunate shift in the company's financial outlook.
As a result, the company's adjusted annual earnings fell from SEK 10.3 billion to SEK 13.6 billion, down to a range between SEK 7 billion and SEK 9 billion.
Observers quickly noted the immediate impact of the fallout on Embracer's share prices. Yet, the company remains positive, planning to increase externally funded game development as it expects to ramp up its net sales in the coming years due to a robust pipeline of anticipated games.
Against all odds, Embracer most recently welcomed Dead Island 2 to the market, which sold millions of units at launch, surpassing the company's expectations.
While this isn't enough to make up for the massive financial setback, Embracer will take any positive news that it can get. For now though, don't expect to see Embracer going on a shopping spree anytime soon.
As for which company Embracer tried and failed to buy for $2 billion, it didn't really say anything about it. But, to pay a lot, it must have been something huge and worth the huge price premium. After all, Gearbox Entertainment, which publishes the Borderlands franchise, cost Embacer less than $1.5 billion just two years ago. The company paid even less to buy Deus Ex, Thief, Legacy of Kain, and Tomb Raider, from Square Enix, last year.
As of the time of writing, Embracer's stock price has gone down a whopping 45.92% over the past 24 hours, signifying that the worst has yet to come.