THQ Stock Tanks, Future Uncertain

Despite the fact that Saints Row: The Third has sold 5 million units and that Darksiders 2 has been given a completely respectable 84 on Metacritic, THQ’s stock has tanked nearly 50% since yesterday, down from $3.02 a share to $1.69. To put these numbers in context their stock was at roughly $24 a share this time last year and over $60 at the end of 2010. If it sounds like the company is in trouble that’s because it is. According to VentureBeat, after a generally short quarterly investor call yesterday, THQ’s CEO Brian Farrell said that Darksiders II didn’t do as well as they had liked and that many of their upcoming projects, while still looking strong, have been delayed. They’ve also hired a company called Centerview Partners, a private equity broker, to help them solve THQ’s cash problems and keep them afloat until their next releases in 2013. One thing is for sure, there’s blood in the water and with the news that they’re short on cash it’s only a matter of time before the sharks begin to circle.

I’m not a financial guy, but I know that whenever a company hires a private equity firm to help them with “strategic alternatives” it’s never a good thing. Since so much of a company’s strength is determined by how strong they appear, it can be damaging enough to simply admit that they need the help. Despite all of the speculation, THQ is hoping to raise enough capital to stay afloat until their next string of releases, namely Company of Heroes 2, South Park: The Stick of Truth, and Metro: Last Night. But with their stocks in a never ending tumble and confidence at an all time low it’s very possible that the company won’t make it to 2013.

That doesn’t necessarily mean that their future releases are in jeopardy. While the ideal situation for THQ would be to raise enough capital to stay alive until their next wave of releases, even if they collapse I would imagine that some if not all of their existing IPs, especially the ones almost completed, would get picked up by someone else. Company of Heroes 2 might not be successful enough to save THQ, but that doesn’t mean it won’t be successful enough for someone else to buy. At least that’s what I’m hoping because the game is looking pretty radical.

It’s discouraging to see a company fail after having two relatively successful titles in the same quarter; Darksiders II still sold 1.4 million copies and Saints Row: The Third sold 5 million. If THQ is still floundering after relatively decent sales, then I doubt holding on for 2013 is going to do much for the company. It seems they have few options left however, except to hope they can raise the capital to stay afloat.

With their stocks this low I would be very surprised if the company manages to keep from going bankrupt or being sold within the next week or two. I also doubt that they will be allowed to keep their Nasdaq listing if this keeps up, although they have saved themselves from that fate once before. Even if they do manage to keep themselves from being eaten alive I doubt they will be able to do it without selling off parts of the company or some major downsizing. Either way, THQ as we know it isn’t long for this world.