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Why THQ's 40% Stock Rise Is Not A Sign Of Recovery

Not a noteworthy figure.

THQ has been under a lot of financial strain for what now seems like a very long time. The company has come close to being delisted from the NASDAQ Stock Market after poor stock performances and there has been concern that the publishing giant is in its death throes.

So I was surprised to see stories (here & here) popping up over the last 24 hours about THQ’s stock price rising 40%, and for a moment fell into the trap that this was the point that THQ’s fortunes would turn. However, this stock price rise is not going to last in the long term, and is more than likely a small period of growth before the price tumbles again a few days after the Humble Bundle sale ends.

You see THQ’s stock price currently sits at $1.40, which is an improvement over the low point of $1.07 but that figure is nowhere near the price THQ should be trading at to secure financial, and therefore operational, security. The $1.40 price tag isn’t even the highest the stock has closed at over the last month.

When WWE 13 was released, the stock price steadily climbed and reached $3.02 before falling dramatically. That means even though the price rose 40% in the last 24 hours, it isn’t even near the price stock was trading at just four weeks ago. I’m surprised that this high wasn’t reported widely, nor the fall that occurred afterwards. In fact if you click through to the THQ Stock chart you’ll see that all through October 2012 the price was almost at the $4 mark. Again, a figure that wasn’t reported.

The reason that the 40% rise was reported was because of the nature of THQ’s Humble Bundle. There are great games available for the average price of around $5, which has increased THQ’s overall sale figures as well as garnered exposure for titles that may have been overlooked the first time around, like Metro 2033. However, the price will likely fall after the Humble Bundle ends because of a gap in the publisher’s new releases.

THQ’s game portfolio and schedule isn’t in the best shape right now. Earlier this year the company lost the license for the UFC franchise, arguably one of the fastest growing sports franchises today, to EA. Guillermo Del Toro’s InSane game was also scrapped due to limited resources. THQ also had to settle with Adidas after failing to publish miCoach and breaking contractual obligations.

Couple those losses of licenses and finances with the fact that THQ’s release schedule is all but empty and you have a long term recipe for disaster. Both Company Of Heroes 2 and Metro: Last Light are expected at some point in early 2013, which will most likely give another temporary stock rise, but they aren’t Saint’s Row or WWE. In fact, unless Homefront 2 gets a summer release date, there isn’t anything major to tide the company over until Autumn 2013.

In the world of stock prices a day increase is nothing, not even a large-sounding increase like 40%. A year ago THQ was trading at $5. Four years ago that price was around the $30 mark. The fact that $1.40 is deemed good news isn’t a sign of recovery, but an indication of how the mighty have fallen.

Source: Figures cited from Google Finance

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6 Comments
  1. Tuffcub
    On the naughty step.
    Since: Dec 2008

    *Applauds* Well said sir.

    Comment posted on 04/12/2012 at 10:37.
  2. cc_star
    Team TSA: Writer
    Since: Forever

    THQ is far from alone here, publishers with massive, well performing portfolios like EA & even Take-Two have tumbled too, not on THQs scale, but they’ve halved in value & massively under-performed their sectors.

    Earlier this the behemoth that is EA was down 50% on what it what it was last November
    http://www.gamesindustry.biz/articles/2012-06-21-stock-ticker-why-eas-market-valuation-has-crashed

    This image here tracks EA, Take-Two & Activision… and compares it against the NASDAQ so you can compare how these companies are doing in comparison to the market.

    As you can see, EA & later Take-Two fell off a cliff whilst Activision (broadly speaking) tracked the market. EA’s share price has bounced back fractionally, but is still nowhere near what it was last year. Never mind it’s 2005 high.

    EA was around $26 a share in Nov 11, it slipped to its lowest ever value of $12 a few months ago & has risen to about $14. In 2005 it was about $70, this is one of the reasons EA is always subject to buyout rumours.

    EA is arguably stronger than THQ, but its shareprice movements are pretty similar

    Share price movement (not it’s actual value) is a measure of the market’s & investor’s confidence in many factors about a business, including assets (for gaming publishers that things like IP as well as tangiable assets), future earning potential & direction the board is taking things.

    Comment posted on 04/12/2012 at 11:02.
    • bunimomike
      Member
      Since: Jul 2009

      More queuing up for the “we’re concentrating on mobile gaming” train of thought, eh?

      Comment posted on 04/12/2012 at 12:13.
      • cc_star
        Team TSA: Writer
        Since: Forever

        And investors have been spooked by Zygna in that arena, it will be tough to say “we can do it better” even though Zygna look spectacularly mis-managed at times.

        Everyone seems to want a boom, to catch the next big wave… Although Acti have a battle on their hands they show that slow & steady can win, they haven’t been distracted by fads and despite falling sales thanks to a stagnating market they show they can make even more money each time.

        EA blew a wad on Star Wars MMO & although look better placed on mobile & thanks to Frostbite 2′s powers well placed for next-gen, Activision keep printing money when they want to and EA, despite perceived advantages, don’t.

        Obviously to translate that back to THQ, it’s even worse for them, they have a couple of franchises but nothing to match Madden, FIFA, Battlefield, CoD, Skylanders or GTA etc (to bring Take-Two into it)

        Comment posted on 04/12/2012 at 13:33.
  3. gazzagb
    Master of speling mitakse
    Since: Feb 2009

    I can see why they’re struggling, I would love a Homefront 2, just a shame that THQ closed Kaos down.

    Comment posted on 04/12/2012 at 12:37.
  4. An-dz
    Member
    Since: Oct 2010

    If they shutdown there will be no Warhammer games. Games Workshop is so picky with its licensing that im not sure if they would give it to anyone else :(

    Comment posted on 04/12/2012 at 14:19.

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