What happened
Shares of Embracer Group (THQQ.F -2.34%) closed Tuesday's trading 13.8% lower. News reports showed that a major shareholder recently sold a large portion of its Embracer stock.
So what
Canada Pension Plan sold 11 million shares of the Swedish video game company in the last week of September, according to the Stockholm stock market's ownership data. Swedish newspapers reported the trade on Tuesday morning, European time, and the negative market reaction was immediate. Embracer's American Depositary Shares opened the stateside morning session 10.2% lower and continued to dip through the day.
Now what
The pension plan reduced its Embracer ownership from 55 million shares to 44 million. The Canadian entity was Embracer's fifth-largest shareholder before the trade and continues to hold that position after the reduction. Owner and CEO Lars Wingefors is the company's largest owner by far, holding 22% of Embracer's capital and 41% of the stock's voting power.
The sale looks scary because it is the first time this shareholder has let go of any Embracer stubs since entering the investment in the fall of 2020. Back then, Wingefors expected the pension plan's interest to open the floodgates for other large-scale investors in North America and elsewhere. From that perspective, it's certainly disappointing to see the Canada Pension Plan take a 60% loss on one-fifth of its original investment.
On the upside, Canada Pension Plan didn't close out its Embracer position and presumably expects its holdings to deliver some value in the long run. The company's recent purchase of the game and media development rights to J.R.R. Tolkien's Lord of the Rings franchise was an encouraging move, and Embracer's overarching strategy of consolidating a large number of smaller game developers under a single corporate umbrella is tremendously interesting.
The Embracer position I started for myself two months ago has lost 30% of its value so far, but I'm not selling and might even pick up some more shares if the stock drops any lower. I want to see what Embracer can do in a healthier market, where gamers and consumers aren't pinching their wallets so hard.
