THQ stock craters as South Park, Metro Last Light, and Company of Heroes releases delayed
Saints Row The Third has sold over 5 million copies, South Park had 3.7 million viewers tune in for the season 14 premiere, but even these numbers don’t seem capable of instilling confidence in publisher THQ, which has delayed three major releases due for extra polish.
In an investor call yesterday, Paul J. Pucino, Chief Financial Officer, Chief Accounting Officer and Executive Vice President of THQ announced a loss of $21 million during the company’s second financial quarter. Brian J. Farrell, Executive Chairman and Chief Executive Officer, disclosed that the publisher was seeking help from Centerview Partners, an investment banking and private equity investment firm, to explore “strategic alternatives.”
This is all standard course of action for a company struggling to pull itself out of the financial mud, but after Farrell’s announcement, THQ did something interesting: they hung up. No questions would be taken, no answers would be given at this time, they told investors. This a very, very troubling sign.
THQ President Jason Rubin, who was hired in July to overhaul the company and give it new direction, seemed to be the only bearer of even semi-good news. “When I joined the company, there were a certain number of titles already too far along in the development cycle for me to have much of an impact. Fortunately, these titles are on schedule, have now been released and were well received by the press and gamers,” he said. “Given the appropriate resources, THQ is as strong as ever.”
Obsidian’s South Park: The Stick of Truth in particular stands out as the basket into which THQ is placing its proverbial eggs. “The opportunity for South Park is massive,” Rubin said. “I can personally say that I have probably had more “laugh out loud” moments in the last four months than in my entire game career to date.”
Unfortunately, Rubin also noted that the title was not up to standards and would “fall significantly short of design specs” if it were to be released on the previously-planned date of March 5, 2013. The game has been delayed beyond the company’s fiscal year, which means that no matter how well it sells it won’t make an impact on the current, worrying financial figures. Metro: Last Light and Company of Heroes 2 will now be released in March of 2013.
Immediately following the investor call, stock prices plummeted by 49 percent.
Outlook not good
The reason investors – and gamers – should be worried isn’t just the poor financial report. Centerview Partners isn’t necessarily going to help THQ bring in more money; they’ve been brought on to explore “strategic alternatives,” and that is quite the vague phrase. Without new releases, THQ won’t be able to bring in revenue, and that’s a tricky position in which to find yourself. For reference, here are some strategic alternatives Centerview has previously explored:
Earlier this year, they acted as advisory counsel to Pfizer when they sold their nutrition business to Nestle. They were the financial advisor to Residential Capital when they filed for bankruptcy. They likewise advised SonicWall when that company was sold to Dell for $1.2 billion. Centerview Partners won’t help gamers get what they want out of THQ, they’re going to do what they can to help the company survive.
In THQ’s case, that may be a sale, it may be bankruptcy, it may be any number of things. THQ didn’t give investors the chance to ask any questions, and it’s unlikely details will be given in the near future. THQ stock is now selling at $1.54 a share as of this writing, so it will be hard to tell investors to hang on until these big-name games are released.
“Management has a track record of over-promising and under-delivering, and the company has been in turnaround mode for the last five years. The additional game delays, hiring of a financial advisor and refusal to take questions increase our skepticism that a turnaround plan can be executed before the company runs out of cash,” financial analyst Michael Pachter stated.
This is bad news all around, as the company is now racing to release these games in a high-quality state before the company goes under completely, and it’s unknown what measures THQ can take without any new releases on the horizon. We’ll be following this story as it develops.