Montreal-based video game giant Ubisoft Entertainment SA has announced it will use funds from a major investment by Tencent Holdings Ltd. to pay off debt after breaching a loan agreement due to accounting irregularities. The company's shares, which had been suspended for a week, experienced a significant surge upon the news.
Accounting Issues Uncovered
Auditors discovered that Ubisoft, the publisher behind popular franchises like Assassin's Creed, had improperly recorded sales from a partnership as revenue under international financial reporting standards. The company revealed this finding on Friday, November 21, 2025, in a statement released a week later than originally scheduled.
The financial review also required the French publisher to postpone recognizing some revenue connected to a deal signed in the second quarter of its 2026 fiscal year. These accounting changes ultimately placed Ubisoft in violation of its loan covenants as of September 30.
Tencent Investment Provides Lifeline
Ubisoft moved quickly to reassure investors by redirecting money from the Tencent investment to address the loan breach. The company confirmed it would use these funds for the early repayment of loans with an outstanding principal of approximately €286 million (about $330 million). This repayment is expected to occur when the Tencent deal finalizes "in the coming days."
"The biggest fear was that the Tencent deal had fallen through," said Ethan Garber, an analyst at Imperial Capital International LLP, highlighting investor concerns during the trading halt.
Market Reaction and Broader Context
The announcement triggered immediate positive market movement. Ubisoft shares jumped as much as 13% when trading resumed in Paris, marking the company's largest intraday gain since December. The company's €675 million note due in November 2027 also saw a substantial increase of approximately 5.3 cents to 90.7 cents on the euro.
This development concludes a week of intense speculation about Ubisoft's financial health. The company had unexpectedly delayed the publication of its first-half results, originally scheduled for November 13, and requested Euronext to halt trading of its shares and bonds pending the announcement.
The Tencent investment, valued at $1.25 billion for a 25% stake in the newly formed Vantage Studios, represents a crucial strategic move. This unit, which began operations last month, houses some of Ubisoft's most successful franchises including Assassin's Creed, Far Cry, and Tom Clancy's Rainbow Six. Co-founder and CEO Yves Guillemot confirmed that all conditions for the Tencent deal have been met and closure is imminent.
Ubisoft stated that money from this investment will be used to reduce the group's debt and support its ongoing strategic transformation, with a new operating model scheduled for presentation in January.
According to the company's report, net debt stood at €1.42 billion as of September 30, with €271 million of this amount directly related to the accounting restatement.
"It puts a question mark over the validity of the numbers in general," commented Cantor Fitzgerald analyst Edward James via email. "The only reason the covenant breach is remotely OK is because the Tencent investment provides them the ability to pay the loans back early."
Despite the accounting challenges, Ubisoft reported stronger-than-expected performance in some areas. The company announced second-quarter bookings of €491 million, surpassing Bloomberg-compiled estimates of €451 million. For the third quarter ending in December, Ubisoft projects net bookings of approximately €305 million.
The accounting issues emerge against a backdrop of broader challenges for the video game publisher. Ubisoft has struggled to maintain its competitive edge in recent years, with high-profile releases such as Avatar: Frontiers of Pandora and Star Wars Outlaws failing to meet expectations in an increasingly crowded market. Prior to the trading suspension, the company's shares had declined by 48% since the beginning of the year.
