Activist Investor Wants Heads to Roll After $6.2 Billion Cyberpunk Fiasco

(Bloomberg) -- An activist investor in CD Projekt SA wants to oust the top executives of Poland’s largest gaming studio for the botched release of the Cyberpunk 2077 title that wiped out more than half of the company’s value.

U.K.-based Abri Advisors, which didn’t specify how big a stake it holds in CD Projekt, wrote to the studio’s board expressing “utter dismay and disbelief with developments at the company over the last 12 months” on behalf of all shareholders.

CD Projekt hyped Cyberpunk as the next global blockbuster and one of the most sophisticated role-playing games ever. Keanu Reeves starred in and advertised the futuristic dystopia while Elon Musk tweeted about it.

But the game’s complexity appears to have overwhelmed the studio. Its release was postponed three times and when it finally came out in December, it was so riddled with glitches that Sony Group Corp. was forced to remove it from its online PlayStation store and offer clients a refund.

Nearly half a year later, after repeated fixes and apologies by CD Projekt, as well as a hacking incident which delayed work, the game still hasn’t been reinstated by Sony. Since Cyberpunk’s debut, the studio’s stock has lost 57%, erasing 22.6 billion zloty ($6.2 billion) in value.

“I don’t think you could have intentionally tried to make so many mistakes as these guys have made,” Abri’s Chief Executive Office Jeffrey Tirman said in an interview. “It’s really shocking.”

He said he’d solicit other shareholders to replace the supervisory board unless CEO Adam Kicinski and his deputy, Marcin Iwinski, are recalled immediately. Abri, which doesn’t disclose its shareholdings to Bloomberg or any other data providers, is “adding” to its CD Projekt position and isn’t shorting the stock, according to Tirman.

Pushing through changes at CD Projekt is set to be a difficult task. The company’s bylaws specify that a three-fifth majority among shareholders is required to remove supervisory board members.

Furthermore, the current executives -- along the CEO’s brother and co-founder Michal Kicinski -- jointly own at least 34% of CD Projekt and therefore play a large role in selecting the supervisory board. The biggest financial investor is NN Group NV’s Polish pension fund, with a 4.2% stake at end of last year, according to Bloomberg data.

The Warsaw-based studio, known for its Witcher medieval fantasy games, said it’s aware of the correspondence and will coordinate its response with Supervisory Board Chair Katarzyna Szwarc. It said that none of the issues raised in the letter were mentioned during its annual shareholder meeting on May 25, for which Abri didn’t register.

Replay Button

Tirman said Abri didn’t take part because he hoped the board would take actions to “correct the ship, instead of just hitting the replay button.” The last straws for him were the company’s first-quarter results and the board’s reinstating of the management team.

After reporting record profit of 1.15 billion zloty for 2020, fueled by Cyberpunk pre-orders and early sales, the company’s first-quarter net income missed the average analyst estimate by 62%, highlighting the company’s troubles with attracting gamers.

Despite a budget of 1.2 billion zloty, Cyberpunk lost its allure after players complained about glitches, especially in console versions. The company didn’t report the game’s sales figures for the first quarter, saying no milestones were reached after it sold 13.7 million copes last year -- compared with 28 million of its latest edition of Witcher.

Tirman, who is also the CEO of Slovenian sports gear manufacturer Elan d.o.o., wants to know how the studio plans to recover.

“I would like the company to put forward a public plan as to how it intends to address all of the shortcomings and how it plans, from a strategic perspective, to repair its brand and trust that’s been lost among its client base and its shareholder base,” he said.

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