Delidded digs into this week’s shareholder report from Fidelity’s Contrafund, which he believes holds convertible bonds in the long-running MMORPG studio. Author Skilliard posits both in the article and on Reddit that “the interest rate on the bond [12%] indicates that the company may be at significant risk of default,” a claim he salts further by recalling what he terms Trion’s “history of layoffs over the past five years.”
On Reddit, Hartsman says that it’s true that “one of Fidelity’s funds has had a small stake in Trion since long before [his] time in [the] job” but suggests there’s nothing to worry about because Delidded’s characterization of the funding as convertible bonds is incorrect; they are actually payment-in-kind bonds from four years ago, which explains the high interest rate.
“It’s no secret that there was a pretty big (and necessary) transition four years ago when I came back on board in this job. This note was a part of Trion’s investors getting the company some breathing room in 2013, so the company could focus on fixing the business by getting on a path to making more money than it was spending. Strategically you can think about it as a transition from a more early-stage, VC-esque ‘Growth at all costs; damn the risks’ to ‘sustainable business with growth potential, while living within one’s means.'”
He also expresses confusion over the “history of layoffs” note.
“We’ve gone out of our way to not be one of those game companies that’s laying people off every year, and we’ve been largely successful at that since the transition four years ago. (If you’re referring to before that time though, entirely fair comment.) I’m a big believer that the teams that make everything work are the biggest asset any company has, and companies damn well need to act like it.”
In fact, Trion hasn’t had any major round of layoffs in the last few years at all to our knowledge; it has famously hired on MMO royalty, shuffled community teams, and built up its Austin base, which is currently hiring.