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Game Industry M&A, Investment Still Booming In Q2 But IPOs ‘Collapse’ Amid Economic Downturn – Forbes



Despite 2022’s difficult economic headwinds, the year is again promising to be a good one for video-game dealmaking, with dozens of investments, mergers, and acquisitions happening even as the sector’s IPO market has “collapsed,” according to the latest quarterly report from industry consultancy Digital Development Management.

Investors put $4.8 billion into 217 deals in Q2, up 37 percent from the previous quarter, while the value of 59 mergers & acquisitions in the quarter topped $18.6 billion, up 135 percent from the previous quarter, according to the DDM Games Investment Review.

“For investments, Q2 2022 is the highest volume for a second quarter at 217 investments and third-highest volume for any quarter on record in our 13+ years of data,” the report says. “It is also the third consecutive quarter where deal volume has exceeded 200 transactions.”

That said, there are signs of slowing even in dealmaking around the huge and red-hot $160 billion video game sector, the Games Investment Review said.

While there were more deals in the year’s first half, they tended to be for considerably less per deal compared to 2021’s mammoth first half of 2021, as the industry roared out the pandemic’s lockdown months with $25.5 billion in investment deals, and another $28.5 billion in M&A transactions. IPOs the first half of last year were similarly off the charts, topping $84.4 billion in value during the first half of 2021 for 16 deals.

“Compared to the first half of 2021, H1 2022 investments are more than halved, M&As are down by a little more than 7%, and IPOs have collapsed,” the report says. “However, the volume of investments is up 33% and M&A have held steady from the incredible pace 2021 set.”

For 2022, the second quarter’s biggest investment was Sony’s $2 billion purchase alongside KIRKBI of a small share of Epic Games, maker of battle-royale title Fortnite and the widely used Unreal Engine, increasingly employed for film, TV and streaming video virtual productions, as well as for creating games and virtual-reality/Metaverse experiences. The Sony/KIRKBI investment valued Epic at $31.5 billion.

Q2 2022 was the third consecutive quarter to top 200 investment transactions, suggesting continued interest in the sector from big-money investors amid a worsening economic climate and huge declines in both the stock market and cryptocurrencies. Among the biggest investors in the sector were Animoca Brands and the Public Investment Fund of Saudi Arabia, part of that country’s much broader push into all kinds of entertainment.

The quarter’s huge M&A increase was driven by Take-Two Interactive’s $12.7-billion acquisition of mobile publisher Zynga, and much smaller deals in the growing sector for blockchain-based games, technologies, and platforms.

The M&A totals don’t include the big one: Microsoft’s $69-billion planned takeover of major publisher Activision-Blizzard, which was announced early in the year. That deal continues under regulatory review but remains on track to close in the first half of next year, according to Microsoft’s quarterly earnings announcements last week.

The one sector that hasn’t been growing is initial public offerings, which have tailed off across the economy amid 2022’s broader downturn.

“At three each for Q1 and Q2, the number of companies having IPOs have returned to pre-pandemic levels, while market capitalizations are significantly down as these were all smaller companies,” DDM wrote.

Investments are “slower but still strong” among blockchain-based game companies. Blockchain-based games such as Axie Infinity
have grown quickly, feeding plenty of investor interest.

But the titles, many of them using a so-called “play-to-earn” mechanism, have proved nearly as controversial in some gaming circles as they are popular. Investors still love the space, however, and their dollars provided a significant chunk of the quarter’s entire investment pie, 44 percent if the outlier Sony/BIRKBI/Epic deal is taken out, according to DDM.

Of particular note, the report said, are the novel ways blockchain startups are using different tactics than just traditional equity investments to fund their startup costs. Increasingly, these games are leveraging token releases, NFT drops, and similar digital components and campaigns that give players a bit of ownership or other in-game benefits for buying in.

“What has been clear is that companies whose gaming projects incorporate play-to-earn mechanics, tokens, and/or NFTs continue to drive investments,” the report says. “The varied nature of their deals and offerings of equity, tokens and/or NFTs have changed how gaming companies can raise investments, making early-stage raises easier to achieve.”

Mobile publisher Jam City’s launch at the end of 2021 of Champions: Ascension as part of a new blockchain-based development division is just one example of the trend. The company sold 10,000 NFTs of its champions to fans, who in turn get the right to help shape the lore and direction of the game when it eventually launches.

In terms of methodology, the company noted that its findings may differ from others because it counts the value of the investment, not the resulting imputed value of the receiving company in figuring out its totals.

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EQB sees mortgage growth moderating following 'tough' quarterly report – Financial Post



‘Clearly, homebuyers are sitting on the sidelines a little bit more’

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Challenger bank EQB Inc. is expecting growth in conventional loan originations to moderate over the rest of the year as a real estate slowdown weighs on demand.

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In an interview on Wednesday, chief executive Andrew Moor said Equitable Bank — the company’s schedule I bank — has seen some slowing in activity in terms of new mortgage applications, but that that was to be expected with rapidly rising interest rates.

“Clearly, homebuyers are sitting on the sidelines a little bit more,” Moor said, adding that the bank saw weaker results in Ontario, which makes up more than half of its business, while provinces in the west were stronger.

EQB, formerly Equitable Group Inc., nevertheless maintained its full-year guidance for 2022, expressing confidence in meeting its objectives despite sector volatility.

The bank added that it has taken “risk-managed actions” over the first two quarters, which Moor said include being more cautious in areas further from city centres.

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“We’ve been just trimming back a little bit in our risk appetite in some of those areas,” he said.

EQB said it also continued to proactively adjust its underwriting approach to respond to elevated risks from inflation, the Bank of Canada’s response to inflation and its expectations of changing collateral values.

This is a tough quarter report

Andrew Moor

Although still expecting EQB to deliver on its growth targets, some analysts are taking a cautious stance on the mortgage finance sector as risk remains elevated.

“Several factors represent downside risks that will continue to constrain sector valuations and share price performance near term, such as rising regulatory and policy uncertainty, rapid rise in interest rates, and housing market risk,” said Jaeme Gloyn, an analyst at National Bank of Canada Financial Inc., in a note to clients.

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Gloyn cut his estimated target price to $73 per share from $75, while maintaining an “outperform” rating on the stock.

EQB reported strong performance on quarterly net interest income on Tuesday with an all-time record of 15.6 per cent return on equity for the year-to-date period. Conventional lending growth in its core operations grew 36 per cent, year over year.

However, Equitable said severe capital market volatility led to mark-to-market losses of $8.7 million on its non-interest income investment portfolio, which it said was conceived so Equitable Bank can gain access to early-stage technologies.

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Moor said the bank is “very much fintech-enabled” and they’ve invested in some of the leading fintechs in Canada, including Borrowell and Wealthsimple.

“This is a tough quarter report. Despite taking a by-the-book approach to achieve and ultimately deliver strong core earnings growth, our efforts put in Q2 are offset by mark-to-market declines primarily in our strategic investment portfolios due to a downdraft in North American equity markets,” Moor said during Wednesday’s earnings call.

EQB said it expects volatility to continue in the second half of 2022, but this does not reflect the underlying strategic value of these investments.

The bank’s adjusted diluted earnings per share for the three months ended June 30 were $1.75, down from $2.64 a year ago.

For the current quarter, Moor said EQB is prioritizing its introduction of EQ Bank’s payment card, the launch of EQ Bank in Québec and its acquisition of Concentra Bank, which is expected to close later in the year.

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1 Investment You Should Have at Every Age – GOBankingRates



For a number of reasons, your 50s is the time to start really amping up your retirement savings accounts. Although you hopefully opened a 401(k) or IRA in your 20s or 30s, this is the time to maximize your contributions. For starters, you’re likely at your peak earnings level, so you’ll be able to sock more away without it affecting your lifestyle. Second, once you reach age 50, you’re allowed to make “catch-up” contributions to your retirement plans. For 2022, you can contribute an extra $1,000 to your IRAs, for a total of $7,000 in any given year. But if you have a 401(k) plan, you can kick in an extra $6,500, for a total of $27,000 per year. If you earn enough money to be able to do it, this means you can put $270,000 in your 401(k) plan from age 50 to 60, which can provide a huge boost to your retirement nest egg.

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Investment manager convicted over $121 Cayman fund – Reuters




LONDON, Aug 10 (Reuters) – An investment manager of a collapsed 100-million-pound ($121 million) Cayman Islands-based legal financing fund was on Wednesday convicted by a London jury of fraudulent trading, fraud by abuse of position and money laundering.

Timothy Schools, a 61-year-old former lawyer who founded Axiom Legal Financing Fund in 2009 to provide loans to law firms pursuing no-win-no fee lawsuits, siphoned off nearly 20 million pounds of investor money to buy luxury properties and cars, the UK Serious Fraud Office (SFO) said in a statement.

His lawyer, David Hanman of Cobleys Solicitors, said he would not be commenting ahead of his sentencing on Thursday.

The jury at London’s Southwark Crown Court failed to reach a verdict for a second defendant, former independent financial adviser David Kennedy. The SFO has 21 days to decide whether to call a retrial. His lawyer was not immediately available for comment.

A third co-defendant, former lawyer Richard Emmett, was acquitted.

“It’s unbelievably horrible to have your reputation called into question,” Emmett said in a statement. “I now wish to get on with my life and career, which this unfounded prosecution by the SFO has placed on pause.”

The Axiom fund was an unregulated collective investment scheme that secured more than 100 million pounds from around 500 investors, who were told a panel of quality law firms would use their funds to back legal cases with a high chance of success.

But tens of millions of pounds were paid to three law firms that Schools either owned or held an interest in, the SFO said.

He diverted more than 19.6 million pounds ($23.76 million) into offshore bank accounts, buying shares in a ski hotel in France and a 5-million-pound fishing and shooting estate in Britain, it said in the statement.

The lawsuits funded by Axiom, meanwhile, were often lost at court and insurance policies failed to cover losses.

Schools covered up the failures by arranging for the repayments of old loans with new Axiom loans, the SFO said.

($1 = 0.8249 pounds)

Reporting by Kirstin Ridley; Editing by Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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