The World Is Getting Worse And Here’s How It Could Affect One Major Game Company

Embracer Group, the Swedish gaming giant, has commented on the state of the world and how economic, geopolitical, and social issues could negatively affect the company’s business outlook. The company says it will conduct a business review, with one possible outcome being to spin off some of its many subsidiaries and take advantage of a Swedish tax law provision in the process.

In a section of its latest earnings briefing titled “Turbulent Times Create New Opportunities,” CEO Lars Wingefors said he remains confident in the company’s “decentralized operating model” with teams and studios spread around the world. However, he spoke candidly about how things could go south.

“The world has changed for the worse in many areas, becoming darker in recent months. We need to adapt to the challenges of geopolitical and social issues around the world and the new macroeconomic reality,” he said, noting that the increased cost of capital will impact Embracer’s business.

“The adjustments in the cost of capital will, compared to before, require current and future investments, both organic and in-organic, to have a higher minimum hurdle with a safety margin to justify the capital allocation. We need to continue our sharp focus on the execution of our ongoing business around the world,” Wingefors said.

Embracer is now conducting a “special review” of its business to “navigate the new market conditions” with the aim of making sure it can “maximize long-term shareholder value creation.”

The company said this review could lead Embracer to a number of conclusions and decisions, one of which could be to spin off its various companies into their own distinct publicly traded companies under the Swedish tax policy Lex Asea. Embracer will do this if it is “deemed to be the best for its employees, create higher shareholder value, and improve our strategic flexibility.”

Embracer is already making some organizational changes, as it recently announced plans to merge Saints Row developer Volition with Gearbox.

Embracer also made waves earlier this year when it acquired Middle-earth Enterprises–which controls the rights to The Lord of the Rings movies, video games, and more. However, Warner Bros. Discovery continues to hold the rights to The Lord of the Rings films.