Hi everyone,
I wanted to share an update on $UBI.PA (Ubisoft Entertainment SA) (Ubisoft Entertainment SA) because the market seems to be mispricing the stock right now. After looking closer at the post-deal numbers, I believe there is a major disconnect between the trading price and the actual balance sheet.
Here is what I am seeing:
1. The Data Error on Enterprise Value.
If you look at most financial websites right now, they show an Enterprise Value of around $2.7 billion. This data is incorrect because it is outdated. The fancy algorithms are still counting the old debt load but are ignoring the ~$1.25 billion cash injection that just arrived from Tencent.
The algorithmic buyers and their expensive screening tools haven't picked up on it yet. They are blindly trusting a database that hasn't refreshed, meaning the stock screens as "expensive" or "high debt" when it is actually trading at deep value levels. In reality, the Enterprise Value is closer to $1.35 billion. The market likely won't correct this until the next quarterly filing updates the databases, giving us a window to act before they catch up.
2. The Vantage Valuation Floor.
We don't need to guess what the assets are worth because $0700.HK (Tencent) (Tencent) just gave us the receipt. They paid a confirmed €1.16 billion for a 26% stake in Vantage Studios (Assassin's Creed, Far Cry, and Rainbow Six).
That transaction mathematically values the studio at roughly €4.4 billion.
Meanwhile, the public market values all of Ubisoft at just $1 billion. There is a massive gap here. Basically, the market is pricing in the expectation that the family will somehow manage to incinerate the €3 billion difference through sheer mismanagement. That is a lot of money to burn, even for them.
3. The "Free" Assets.
Because the market cap is so much lower than the value of the Vantage stake, the market is effectively assigning a negative value to the rest of the company.
If you buy shares today, you get the Vantage stake at a steep discount, and you get ownership of IPs like The Division, Ghost Recon, Star Wars, and Just Dance effectively for free. Even if these franchises underperform, they still hold significant residual value.
4. The Family Survival Instinct.
Many people view the management as incompetent regarding game releases, but the Guillemot family is very effective at corporate survival. They moved the heir, Charlie Guillemot, to run Vantage Studios, effectively securing the "lifeboat" for the family legacy.
They did not spend a lot of time and resources to fight off the hostile takeover attempts years ago just to let the company fail now. Their goal is to maintain control, and to do that, they need the share price to stabilize. Their "greed" for control aligns with shareholders needing a higher stock price.
5. The "Mean Reversion" Thesis
This is the most critical point. Ubisoft does not need to become the next Rockstar Games or release a massive hit for this trade to work. They just need to be average.
Right now, the stock is priced for bankruptcy (roughly 0.5x revenue). A standard, average gaming company usually trades at 2x to 3x revenue. If Ubisoft simply stops bleeding cash and stabilizes as a mediocre company, the valuation should naturally revert to the industry average. That shift alone would represent a 300% to 500% return from the current stock level.
The bankruptcy risk is largely gone due to the cash injection, but the stock is still priced as if the company is insolvent. I believe this offers asymmetric risk/reward, and I have added to my position.
Thank you for copying. ... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
This is the trading equivalent word salad of the desperate cope we saw for why the latest Assassins Creed was "totally not, like, flopping and aKtUaLy has plenty of players".... Show More
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Sat May 16 2026 23:29:51 GMT+0000 (Coordinated Universal Time)
