Tencent Buys ‘Clash of Clans’ Developer Supercell for $8.6B

http://www.wsj.com/articles/tencent-agrees-to-acquire-clash-of-clans-maker-supercell-1466493612

by downandout • 10 years ago

118 27 10 years ago

shaqbert2• 10 years ago

Tencent benefits from insane price-earnings multiple inflation in China.

By buying a profit-rich gaming company, they can play the multiple game, and lower their P/E multiple in China, thus looking "cheap".

In general, gaming companies have been trading at fairly low multiples (King was trading for a while at multiples known for steel mills shortly before their bankruptcy), based on the assumption that the business is hit driven and the life cycle of a hit game is rather short. Yet Supercell has been defying the odds for quite some times now...

So who knows... playing the multiple game might turn out a much better deal long term.

robk• 10 years ago

When did King go bankrupt? They came close when private but kdon't now what you mean here

pduan• 10 years ago

No, he is saying King was trading at valuations close to steel mills prior to those same steel mills going into bankruptcy.

nemothekid• 10 years ago

King was trading for a while at multiples known for steel mills shortly before their bankruptcy

King was acquired by Activision for 6B. Do you mean before King went bankrupt in 2003? Is that relevant?

shaqbert2• 10 years ago

No, King was trading at super low multiples. Like steel mills that are about to go bust. My point is that King is a MUCH better business that a steal mill about to go bust, so financial markets were dead wrong.

personjerry• 10 years ago

Hey shaqbert, how do you keep tabs on these sorts of things? I want to get to know more about the financial markets but I mean, I don't know where to start--there's just so many companies out there.

iaw• 10 years ago

Start by reading "A Random Walk Down Wall Street" by Malkiel, it covers the ins and outs (and gives you a starting point for more research on anything you don't understand).

After that it's on you to read financial news. Knowing that the Chinese market is hyper-inflated, coupled with the knowledge from the Malkiel book about P/E tricks, it's easy to make the connection.

edit: I was reflecting on the last line and I want to point out that nothing is "easy" in finance, it takes a lot of hard work to reach a level of competent understanding. More that once you have the toolkit to understand the basic financial shenanigans that have been going on for a century (or more), a lot of seemingly strange behaviors become rational.

adventured• 10 years ago

Not sure what you mean by insane PE inflation, their stock market bubble is long since popped. The Shanghai Composite hasn't net moved in five years, the same is true for Hong Kong. Tencent has been sporting a 35-40 PE ratio lately.

Facebook's PE is ~70 by comparison. In the last few decades, a PE of 35-40 for a tech company isn't particularly rich for a successful company with years of growth ahead of it yet. Google for example has commonly had a PE above or near that level for over ten years.

Juha• 10 years ago

Here is Supercell's official announcement: http://supercell.com/en/nextchapter/

Snippet form the post:

First, we have agreed with Tencent that Supercell will continue to be operationally independent, exactly as it was under SoftBank's ownership...

I hope they manage to keep their own way of running the company.

vblord2• 10 years ago

Clash of Clans recently made changes to make the troops cheaper, cutting in to their revenue. They were trying to push Clash Royale as their new cash cow and loosened the reins a bit on Clash of Clans. Hopefully Tencent will keep up that trend and not reverse it.

P.S. If anyone is looking for a good clan on Clash of Clans, check us out #29OPCGCY

jlarocco• 10 years ago

I'm not sure. I think making the troops cheaper and generate faster encourages people to play the game more, not less.

And the last upgrade added quite a few building, troop, and spell upgrades, which also encourage people to play more.

Personally, I can't stand Clash Royale. Besides lagging and crashing a lot, the match up algorithm is intensely frustrating. It felt like maybe 1 in 4 matches I was just completely steam rolled with absolutely no chance I could have won.

bsder• 10 years ago

Clash of Clans recently made changes to make the troops cheaper, cutting in to their revenue.

I doubt it.

The problem with all of these games is that they are highly dependent upon the .01% of the whales who spend huge amounts of money on the games. CoC was, somehow, noted for being a playtoy for rich, bored Arabs with oil money.

Progression in these games is HIGHLY dependent upon spending money. One clan founder I know in CoC has stolen almost 5 times the amount of gold as the current number 1 player in the world yet still hasn't cracked into the last level of the game (Level 11 Town Hall).

Yeah. Money sink.

mathattack2• 10 years ago

There are rumors that Tencent is also amongst the bidders for the Ultimate Fighting Championship. (The whole sport, not just the game)

http://www.reviewjournal.com/sports/mma-ufc/ufc-reportedly-v...

asniper• 10 years ago

You mean the company, UFC isn't a sport, MMA is.

mathattack2• 10 years ago

Yes - you are correct. Just highlighting that it's not a game purchase.

smaili• 10 years ago

IMO this was the acquisition that Activision should have made instead of King.

thedangler• 10 years ago

I think Tencent just bought the UFC too. I could be wrong.

dang2• 10 years ago

Url changed from http://www.theverge.com/2016/6/21/11986712/tencent-supercell..., which points to this.

downandout• 10 years ago

I purposely didn't post the wsj URL because of the paywall.

dang2• 10 years ago

Understood, but there's a tradeoff with HN's call for original sources (https://news.ycombinator.com/newsguidelines.html) and the rule is that paywalls with workarounds are ok.

bluedino• 10 years ago

Does buying a one-hit wonder game company ever work out?

mikek• 10 years ago

They have more than one hit:

Clash of Clans, Clash Royale, Hay Day, and Boom Beach.

And arguably, they have a process for generating more hits like this.

edit: added Clash Royale

changdizzle• 10 years ago

you forgot their latest and greatest - Clash Royale, generated $190mm in revenue in the first month out

xenihn• 10 years ago

Riot

hkmurakami• 10 years ago

Headline is modestly inaccurate.

Tencent and its partners will together buy an 84.3% stake in Supercell for $8.6 billion from Japanese telecommunications firm SoftBank Group Corp. and the startup’s current and former employees, the companies said Tuesday. The deal values the closely held Supercell, maker of some of the world’s highest-grossing mobile games, at $10.2 billion, nearly double its valuation a year earlier.

makecheck• 10 years ago

Yes, Supercell made a fun game but there is no way it is worth billions when so many other apps and games receive chump change for their development efforts.

Part of the problem is that if someone actually does buy a “gem bag” or whatever they’re selling, it amounts to a single-vendor gift card (and not one that can buy very much).

I think it would have been much cooler if all gems were tied to the entire platform, and they worked in any game. For example: if you play game X for awhile and earn some gems, maybe that time spent can be used to “buy” progress in game Y. The platform could enforce some minimum time limit, e.g. no one can develop an app that rewards gems at a rate greater than some number per hour up to the time since the app was first downloaded.

And if it is possible to purchase gems, they should only cost money when they’re used. That way, you don’t have to buy a “bag” of 300 gems that you may never entirely use; instead, you can divide your rewards among all the games you like (including new games that come along).

Tencent Buys ‘Clash of Clans’ Developer Supercell for $8.6B

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