Whether we’ll ever truly find out what just happened behind the scenes at Embracer is anyone’s guess, but right now, as we write, it’s hard to imagine a more twisted tale of bad news, poor timing and market knee-jerk.

Embracer, the expanding, increasingly powerful home of brands such as Tomb Raider, Dead Islands and Borderlands just had a bad day…

For those not up to speed on the Embracer story so far, it appears that the events of the past few days unfolded like this.

Embracer have had a deal brewing for some time. Valued at $2 billion it would have provided the company with an instant cash injection and ongoing revenue from "a range of large-budget games". Who can say if the deal was specifically sculpted to put a shine on their soon-to-be-released financials or not, but there’s no doubt that - given the slightly grim face of their figures so far - that the reveal of a “but don’t worry, we’ve got this in the bag” deal would certainly have lightened yesterday’s numbers.

Perhaps therefore the weight and importance of the deal began to weigh heavily on Embracer’s mind and perhaps they pushed their luck. Or - as in all things big business - the other party began to smell Embracer’s need and saw an opportunity to up the stakes.

Either way, the deal was soon scuppered at exactly the moment that it should have been sealed.

And the rest is recent history. Yesterday Embracer were forced into not only revealing financials that would (and have) disappointed investors, but also into using that self-same media spotlight to announce the loss of the $2 billion deal that would have saved the day.

Facing the music

Appearing full of regret and speaking with candid honesty Embracer CEO Lars Wingefor took Q&A as part of the go-ahead-as-planned Q4 presentation stating, “It’s been a rough night. When you have your presentation, your communication… You have everything prepared and I’ve been working day and night for almost half a year to achieve something… But hey, this is business. I know shareholders and stakeholders expect me to win every battle that can be won, but we didn’t win this one. We needed to make a decision and they can’t wait forever."

Needless to say, the release of poor financials will usually have a negative impact on a share price with the reveal of the previous quarter’s efforts (having not borne the fruit expected) casting a shadow onto the likelihood of success of future endeavours. But the Embracer situation right now seems to have taken this to another level.

At the time of writing Embracer’s stock has crashed a full 45% from its typical SEK 41.25 on Tuesday to a flatlining 22.58 right now.

The end of the line?

It’s an extreme situation for a company that, previously to this panic, had been putting every foot just about right. Embracer secured Gearbox, the publisher of Borderlands in a $1.3 billion deal in 2021. And the acquisition of Crystal Dynamics and Eidos and Square Montreal for $300 million in 2022 (a deal which also included the rights to properties such as Deus Ex, Legacy of Kain and Tomb Raider) was seen as something of a coup (and a bargain) at the time. 

That deal involved both Tomb Raider and Legacy of Kain ‘coming home’ to Crystal Dynamics, the devs who had made both games massive, with successful reboots seemingly in the bag.

And the promise was that more good times were on the way.

But it appears that the lost ‘$2 billion deal’ would have far eclipsed even these winners both in terms of the cash involved and - it seems - the potential earnings to follow. And it seems that, perhaps fuelled by knowledge of what was really at stake, investors have pulled their money rather than ride the storm.

Had Embracer got too big? Risked too much? Put too many eggs in one basket only to have it stolen away at the exact moment that could do them the most harm? It seems that the city knows the answers.

Meanwhile, to industry watchers, the exact nature of the deal - who exactly was going to come under Embracer’s wing and provide them with a guaranteed money spinner for the years ahead - remains a mystery.

For now.

But you can be sure that big deals like this don’t just evaporate. If $2 billion wasn’t enough to seal it with Embracer then perhaps someone else - perhaps buoyed by the importance the city has apparently put on the deal - may see differently.

We’ll be ready and waiting to report on who bites first.