Penny Stocks and Takeovers

Posted by Daeity On Monday, April 10, 2017


If you know anything about me, you might say that I have an unhealthy obsession with video game companies, particularly their inner workings. I do a significant amount of digging into financials, business practices, employee posts, public boards, talk to industry employees, and listen to chatter from the industry.

I've written a lot about Activision, Blizzard, EA, and Ubisoft in the past. But, what you might not know is that I also frequently invest in video game companies. I won't invest in something I don't fully understand however. Investing is like gambling, except you can have an edge simply by doing proactive research. Activision, EA, and Ubisoft.. their futures were fairly certain in the beginning. I've owned stocks in ATVI since they were $10-11, Ubisoft at $5, and EA at around $15. I had invested in Tencent back when they were 50 HKD too, and I've written about them many times in the past due to their relationship with Blizzard.

You won't find me investing in much other than entertainment, gambling, electronics, and gaming companies.

Now one company that I have been following for a VERY LONG TIME is Guillemot Corporation. I was initially interested in them back when they manufactured video cards, but was surprised when they acquired Hercules. Shortly after that time, the company lost a huge amount of value and they've been quiet for several years. These days, they just do a little amount of sales and they own the ThrustMaster line of gaming joysticks. It is a small, but profitable business. But what many people don't know is that this company was the birthplace of Ubisoft, and they acted as the gaming company for a short time, before splitting off and creating the Ubisoft Corporation as a separate entity. If you look back at ancient versions of the Guillemot website, you can see their old game releases.

Takeovers you say..

Back in November, there was some industry chatter about several different movements taking place within the Guillemot Corporate family, especially within the Shanghai Ubisoft management structure. Something big was happening. I suspected that it might have something to do with fears of a hostile takeover by Vivendi. They already snagged the Guillemot family's Gameloft, and many experts believe that Ubisoft is next on their target list. My suspicion is that key employees, and potentially licenses/contracts, are being juggled around companies within the Guillemot sphere of influence in order to protect themselves, or at least create some obstacles, in the event of a hostile takeover.

Guillemot Corporation was really their only other public company under their complete control, so I purchased various stocks at around 1.30 EUR. I think something big is going to happen here, including some assets being moved from other Ubisoft facilities to this one. It's climbed about 0.20 EUR since then, but I honestly think something big is still going to happen in the near future that will drive up public interest and value in their stock. And even more events taking place until the end of the year.

Of course, this could just be Vivendi attempting to drive up the stock price of Ubisoft, before selling it off. They haven't fared too well in the gaming industry, and it's something they should abandon. Nothing increases stock prices more than increasing your stake in a company, spreading rumors and then denying them.

And you mentioned something about "penny stocks"?

But now my attention is on a smaller public gaming company. It's a penny-stock too, something I've never really invested in before. It was a Canadian company called Imperus Technologies Corp., who renamed themselves to 'Tangelo Games' (currently at $0.04) after acquiring Diwip Ltd. out of Israel, and Akamon Entertainment out of Spain. There's really nothing to write home about these companies, they don't create anything too special or unique like the big guys, but they have a lot of experience constantly pumping out small gambling and casino games for mobile devices. And, they are very successful. Currently, the company is very profitable, but they are also massively in debt from previous investments and decisions.

There are two primary players in this company that interest me: James Lanthier (CEO) & Vicenç Martí (previously owned Akamon and was made President of Tangelo).

Vicenç owns another company too, called 'Billy Mobile' that operates in the exact same building as Akamon Entertainment. Interestingly, just a few weeks ago, the offices of Billy Mobile were raided by police in Spain. The operation was related to mobile telephony fraud. =]

From what I dug up however, it's only because of their very aggressive marketing (too many text messages to users who complained.) They'll get off with a slap on the wrist and a small fine. But, that Billy Mobile company he owns looks like it's going to be highly successful. If it was a public company, I would have invested in it by now. I think it's going to make big waves, but only in certain countries where their aggressive strategies are still legal. And, I suspect that Billy Mobile will be utilized by Tangelo Games in the future as well. Billy is Vicenç's baby, the golden son, and where I think most of his efforts are currently being placed. He sees it as a billion-dollar company, and he's not wrong.

Now the CEO of Tangelo, James Lanthier, he's a different creature. His primary passion isn't exactly creating video games, but rather increasing the value of entertainment companies, and then selling them off as a complete package. He's into acquisitions and being acquired. Two men with different drives. From what I see, James has been working on reducing company debt - so I don't think there's going to be any problems here. It's a highly profitable business, really just running on old titles at the moment, that will be able to pay off the debt within a reasonable time frame.

And from the developer stand point, the teams are all still busy and hard at work. They aren't developing new games, but rather porting over all of their existing libraries onto a new platform (Unity) so that it can be supported on new devices. New graphics, new engine, and more devices of simple casino games that have worked. There is currently a hiatus of game releases, however there is going to be a huge rush of titles being released simultaneously at the end of this year.

So, what we have is a hugely undervalued company, with very little investment risk, a flood of titles coming out at the end of this year and early next year, and managers who are driven to make the company valuable enough to be acquired. That sounds like a reasonable investment to me, and if you also want to make some money with little risk, I would advise investing this company at the $0.04 rate or under before the end of 2017.