In late October, the technology fund TIN New Technology sold 23% of its shares in the gaming company Embracer for nearly 93 million SEK, according to the ownership service Holdings. This move shifted Embracer from being the fund’s second-largest holding to now ranking seventh.
“We have found better alternatives, and the stock has performed very well since the summer. It has reached over 30 SEK, so we have taken the opportunity to divest at favorable levels,” said Carl Armfelt, one of the fund’s two managers.
According to Armfelt, the divestments were not due to the restructuring that Embracer announced earlier in the year. To streamline operations, the conglomerate will become three separate publicly traded companies: Coffee Stain & Friends, Middle-earth Enterprises & Friends, and Asmodee.
The latter company is the French board game conglomerate acquired by Embracer in 2021, rapidly moving towards a listing on the Stockholm Stock Exchange, expected to take place by March 2025 at the latest.
A technology fund holding board games may seem unconventional, but Asmodee currently accounts for about a third of Embracer’s revenue. However, it remains uncertain how Embracer’s shares will be divided among the three new public companies and what value each entity will hold.
Nonetheless, TIN New Technology, focused on investing in technology-driven growth companies, will soon hold shares in a pure board game operation.
“Developing a good video game costs at least 500 million SEK. Developing a good board game, on the other hand, can cost as little as 10 million SEK, which has allowed Asmodee to be more efficient in converting revenue into cash flow compared to the video game sector,” explained Carl Armfelt.
“Can a technology fund like yours hold shares in Asmodee?”
“Yes, we can. We do not have strict fund regulations that require us to sell Asmodee immediately after the IPO,” said the fund manager.
“However, since it is a board game company, I do not consider it to be at the core of what we do. We will prioritize more innovative companies if we believe it will yield higher returns.”
“If Asmodee goes public at an overly high valuation, it is ‘not impossible’ for TIN New Technology to divest its shares on the first day,” Armfelt stated.
“We may not even be shareholders on day one after the spin-off. It depends on the valuation of the three parts; the most important thing for us is the return on investment.”
“But if you see benefits in the valuation, could TIN New Technology hold Asmodee for another five years?”
“I wouldn’t consider that likely,” Armfelt replied.
However, he would consider retaining the shares if something “very innovative” emerged from the company, something that could be deemed as a technically innovative operation.
Currently, he has more faith in Coffee Stain & Friends, a video game developer, which he believes aligns more closely with the fund’s core principles.
The evolving landscape of Embracer and its subsidiaries presents a unique opportunity for TIN New Technology to navigate the intersection of technology and entertainment, potentially reshaping the fund’s investment strategy and portfolio composition in the coming years. As the market continues to evolve, TIN New Technology’s decision-making process will be crucial in determining its future success and relevance in the ever-changing tech and gaming sectors.