Game Over for This Diehard Gamer?

THQ (UNKNOWN: THQIQ.DL  ) may be the next casualty of the three-year lull in the video game industry.

THQ revealed last night that its CFO was leaving the company as it steps up talks with a financial sponsor to explore potential funding alternatives.

The publisher best known for its Saints Row franchise, wrestling games, and the once-popular uDraw platform of drawing diversions has obviously felt the pinch of gamers gravitating to casual and social gaming.

If you think that Take-Two Interactive (NASDAQ: TTWO  ) has it bad between Grand Theft Auto releases -- or that Activision Blizzard (NASDAQ: ATVI  ) and Electronic Arts (NASDAQ: EA  ) have been frustrating investments as industry leaders -- they've got nothing on THQ on the way down.

THQ executed a 1-for-10 reverse split this summer just to keep its stock in compliance with Nasdaq listing requirements. Now it may need to go back to that well again, especially since any financing solution in these desperate times will surely be highly dilutive to today's shareholders as it brings the share price lower.

It isn't easy being a video game developer or publisher these days.

Activision Blizzard is still the top dog, fueled earlier this year by the surprising success of its Skylanders franchise. Last week's release of Call of Duty: Black Ops II will clearly only help. EA has several trusty EA Sports properties that provide steady annual repurchase rates, but the company has also been a major player mobile and social diversions. Take-Two Interactive has new life now that we finally have a springtime release slated next year for Grand Theft Auto V.

THQ and lesser gaming companies don't have it that easy.

Even diehard gamers have sworn off all but the marquee properties, and that's bad news for THQ. It was doing well when its licensed wrestling games were all the rave and Wii owners were warming up to its uDraw drawing tablet, but these days gamers are only saving up for the big games that have a longer-than-usual playing life thanks to online gaming enhancements.

Buying into THQ at this very vulnerable moment is risky. Despite the compelling opportunity that is suggested by a stock with recognizable properties that has shed more than 90% of its value over the past year, it's getting harder and harder to fathom THQ making it out of this intact.

Digital future
THQ investors can blame the mobile craze for its demise, but they can still profit from the shift. It's true that the next trillion-dollar revolution will be in mobile, and there's an easy way to cash in. A free special report will get you up to speed.

Read/Post Comments (3) | Recommend This Article (3)

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  • Report this Comment On November 22, 2012, at 3:56 AM, jacobandersen72 wrote:

    THQ's problems are simple.

    They spent too much money making too many shitty games.

    SR3 sold 5 million copies. That's a huge hit.

    that's $150 to $200 million dollars.

    that alone is reason to believe in THQ.

    as for mobile being next... nahh.

  • Report this Comment On November 24, 2012, at 11:11 PM, iamvoltron wrote:

    UDraw never was successful, especially the hw bundle. Abandoned in late 2011 and one of the major reasons THQ is in trouble.

    However, the article focuses on the past. I'm more optimistic. THQ is now focused on quality core games in 2013


    South park

    Metro ll

    As long as they get interim financing until these games ship, things look better. Truce with WFC helps.

    Also, with a market cap below 10 million USD, masive dilution is already priced in.

    Play this speculatively with a small amount.

  • Report this Comment On November 26, 2012, at 11:56 PM, thecrap0n wrote:

    There can be no doubt. THQI is on its way to bankruptcy. Even with additional financing they only have one game coming out next year that will probably undersell Darksiders and that didn't even break even. If they barely made it through this year, they don't have a prayer in 2013.

    As a gamer, I really hope that Metro can be saved ... by another publisher. The best scenario would have THQI dissolved and its assets sold off to competitors.

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