Just a week ago, we covered EG7’s first quarter financial report, and you know what, it was good. Like real good. Like record-setting for the company good, with Daybreak pulling more than its own weight, Piranha having its best quarter ever, and My Singing Monsters continuing to make absurd piles of cash. I filed that article and sat back in my chair and felt pretty pleased with Daybreak’s outlook; regardless of the company’s past shenanigans (and there are so very many), the MMO studios seemed peachy and safe, a company we wouldn’t have to worry about for a while again.
Ho ho ho not so fast! As first noticed by The Ancient Gaming Noob, one of EG7’s largest investors is hopping mad that EG7’s successes aren’t being recognized by the public and generating even more cash for said investors, and it’s devised a broadly destructive plan to do just that.
Alta Fox Opportunities Fund (which holds 6% of the stock) specifically blames EG7’s undervaluation and lack of reach beyond Sweden on the company’s previous caretakers, who were effectively ousted by Daybreak’s leadership duo – Jason Epstein and Ji Ham – who now run EG7 outright as Chairman and (Acting) CEO, respectively. Indeed, the investment group praises Epstein and Ham for personally investing in the company and dumping Russian Innova Games, which boosted EG7’s cash position.
Nevertheless, the letter ostensibly penned to EG7’s board of directors is delivered as a public press release that “encourage[s] the Board to commence an immediate exploration of strategic alternatives – including a sale of the entire Company – among other initiatives, which [Alta Fox] believe[s] could unlock more than 100% in near-term upside for EG7 shareholders.” In other words, it’s less a friendly suggestion to the board and more an appeal to other investors to join the movement to trash EG7 for quick payouts.
“[I]t is obvious to us that EG7 is a high-quality business that remains dramatically undervalued due to no fault of current leadership. The market’s recent muted reaction to strong Q1 results only reinforces our view. […] It is our view that the Board must act expeditiously to address the Company’s significant trading discount so that long-suffering EG7 shareholders can prosper. That is why we encourage the Board to initiate a review of strategic alternatives to close the gap between the Company’s market value and intrinsic value, among other steps in the near-term.”
In addition to suggesting the board attempt to sell the entire company to generate instant profits for shareholders, Alta Fox also recommends initiating a recurring dividend (directly paying shareholders a 10% dividend on share prices) and relisting the stock on a US-based stock exchange instead of the Swedish exchange (which would reduce consumer protections for shareholders and allow exploitative stock buybacks).
I don’t think anyone’s going to have a better take on this than Wilhelm already did; he deemed Alta Fox a member of the robber-baron capital-management class angling to kill our MMOs to make a buck. “This is all just naked greed with only one outcome in mind, and it has nothing to do with video games,” he says. “If they could increase shareholder value by 0.5% but shutting down all of the Daybreak titles, they would do it in a heartbeat. They have no interest in the long term, just what they can grab today.”
We’ve certainly come a very long way from the days of Columbus Nova if our best hope is that Swedish investors tell Alta Fox to jump in a lake and that Epstein and Ham do right by the games.