FILE PHOTO: Angry Birds characters Bomb, Chuck and Red are pictured during the premiere in Helsinki, Finland
FILE PHOTO: Angry Birds characters Bomb, Chuck and Red are pictured during the premiere in Helsinki, Finland

Angry Birds maker dragged out of silence after stock is dumped

By Kati Pohjanpalo and Raine Tiessalo Time of article published Feb 25, 2018

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JOHANNESBURG - The company behind the Angry Birds game is struggling to stop investors walking out.

Rovio Entertainment Oyj interrupted a “silent period” on Thursday to tell shareholders that 2018 will be far worse for the Finnish company than initially thought. After issuing a short statement, it then went quiet again, promising more information in connection with its annual results on March 2.

Furious Investors Dump Shares of Angry Birds Game Maker

But as the profit warning wiped off half its market value, leaving it worth around $500 million, management decided to break its silent period again, and convene an ad hoc conference call.

Chief Executive Officer Kati Levoranta, who led Rovio through its initial public offering in September, said it was the intense selloff that forced her into dialogue with the market.

“Having seen how strongly the stock market had reacted to our preliminary information, and especially, as we assume, the outlook for 2018, it was prudent to change the original approach and have a dialogue with investors and analysts already today,” she said.

Her decision followed investor criticism. Carl Armfelt, a portfolio manager at Swedbank Robur Fonder AB, said Rovio has “been bad at communicating since its IPO,” according to Dagens Industri.

Silent periods are self-imposed, but Finnish companies are required by law to alert the market to sudden changes in their circumstances, including drastic revisions to earnings outlooks.

Tero Kuittinen, who has analyzed the mobile games industry for nearly two decades and now advises Rovio’s competitor Next Games Oyj, says the company is deliberately leaving the market in the dark on some key pieces of information.

“Rovio is a rare case in that it has clearly decided not to guide analysts on some basics -- such as the volatility in the licensing business or user acquisition costs,” he said. “When the results then come in outside of the estimates range, it causes a strong reaction. This is of course why most of the companies attempt to manage analyst models to some extent.”

Analyst Cuts

Thursday’s profit warning has already prompted Swedish bank SEB to cut its share-price estimate for Rovio by 60 percent. Mathias Lundberg, an analyst at SEB, had been advising clients to buy Rovio shares, but now says they should just hold on to what they have. The industry’s focus on spending to win over users has got “to the point where the equation barely gives any payback,” he said in a client note.

After losing 50 percent in Thursday, Rovio shares traded just 3 percent higher by 12:10 p.m. in Helsinki on Friday.

Investors are desperate for proof that Rovio isn’t a one-product wonder, and that it can repeat its Angry Birds success. So far, the company is burning through its cash to bring more users on board, but revenue from its main products is tumbling.

“They’ve had to own up to the fact that they’re having to buy revenue with expensive marketing spend,” said Aaron Kaartinen, an analyst at asset manager FIM. “The games have to have genuine pull and at the moment, they just don’t really have such games.”

Kaartinen says Rovio has “positive Ebit, so they’re not in a crisis.”

“They may have thought that the well-known name helps get users to play the games, but this doesn’t seem to be the case,” he said. The game just has to be so good to bring in the big bucks.”


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