Global sell-off sees EA down 5%; Activision down 3%; Take-Two down 5%; THQ down 8%; Ubisoft down 1.5%
Shares across the US and Europe were in free-fall yesterday amid warnings that the global economy had entered a danger zone.
Publicly traded games companies, from Electronic Arts to Activision, were victim to a global sell-off that saw the main indexes in the UK, Germany and France fall about 5 per cent.
This morning markets across Europe stabilised. Yesterday the Dow Jones share index fell about 3.5 per cent as the International Monetary Fund sent grim warnings of how inaction was dismantling the global economy.
The wider conditions have seen publisher shares spiral. Electronic Arts yesterday closed at $20.79 on Wall Street, down 5.4 per cent from the day prior.
In the same period, Take Two shares sank 4.8 per cent ($12.62), while Activision trading decreased 3 per cent to $11.57.
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THQ shares began to slide earlier. At close of trading on Wednesday, the group’s stock embarked on a traumatic 8.8 per cent decline that ended on Thursday.
Ubisoft, which is traded on the Euronext pan-European stock exchange, suffered from a 1.42 per cent decline.
The United States, which was recently downgraded to a AA+ economy by Standard and Poor’s, continues to suffer across its stock markets.
Yesterday the Federal Reserve warned that the US economy faced "significant downside risks".
"Markets rely on confidence and certainty. Right now there is neither," said economic strategist John Canally.
On Thursday, Christine Lagarde, head of the International Monetary Fund, said that the economic situation was entering a "dangerous place".
Economic fears have dented Zynga’s bid to be listed on the New York Stock Exchange. The social games giant has delayed its IPO until further notice.
On Friday, the main indexes in the UK, France and Germany were all up between 0.5 and 1 per cent in early trading.
Although the panic in the stock market isn't helping, the lack of confidence in the video game publishers has been growing (i.e. confidence decreasing) for some time now.
This has led to companies like THQ and Ubisoft being on multi-year lows - far lower than their nadir of the 2008 recession.
This is because there is a belief in the investment community that the game industry is changing and that the traditional publishers may not have a place in it going forward. I continually hear people refer to them as legacy companies and it seems that the received wisdom amongst investors is that there are no growth opportunities for them.
I actually disagree and have written a long piece explaining why on my website www.bougafer.com which is for people who want to invest in the video game industry.
If you don't want to find it from the front page then here's a direct link http://www.bougafer.com/forum/growth-opportunities-traditional-video-game-publishers
In summary, although the top line figures would indicate that the industry is in decline since its peak of 2008, I think that if you dig a little deeper then you see that a) things aren't quite so true for the traditional publishers and b) even in a falling tide there are still big growth opportunities for them.
