Slightly Mad car crash at Codemasters

I decided to considerably trim my position in video games company Codemasters this week, taking some profit, but leaving myself with some petrol in the tank. I’ve been watching the company for some time, previously writing about how I went full throttle following the company’s IPO. However, following the company’s purchase of Slightly Mad Studios, I felt maybe the valuation was too rich, despite the deal being done by paying in a mixture of Codemasters stock and £19.4 million in cash. All the same, I held off selling my holding, deciding that the games in the pipeline, notably a Fast & Furious franchise and the latest in the popular Project CARS series, would help accelerate Codemasters’ earnings.

It appears that Fast & Furious Crossroads was a big flop and Project CARS 3 clearly didn’t live up to the expectations of its loyal fanbase. According to Metacritic, an aggregator of reviews, the Fast & Furious game got just 35 out of 100 for the PS4 version of the game. Reviews on the Steam platform were just as unfavourable with a “Mostly Negative” rating based on 43 reviews. Project CARS didn’t do quite as abysmally, with 68 out of 100 on Metacritic, and reviews on Steam garnering a “Mixed” rating. It seems many fans of the Project CARS series felt this iteration of the game steered off course – more geared towards the casual racing fan rather than the serious simulation heads.

I fear that sales of the Fast & Furious game will really be found wanting, while Project CARS 3 won’t meet expectations. Codemasters isn’t completely written off yet though, DIRT 5 is out on 16 October 2020 and the popular F1 franchise left the starting grid on 10 July 2020.

So with racing and car puns put aside, what has the share price been doing? Well, it has had a good run of late, hitting new highs since the coronavirus-induced crash in March. But some investment managers feel this is time to cross the finish line and put some profit on the podium.

CDM chart via London Stock Exchange

Sand Grove Capital Management LLP cut their position from 5% to 3.41% on 23 September 2020, according to a regulatory filing. HSBC also did the same with its holding of shares and financial instruments, bringing it down from 5.1% to below the disclosure threshold.

I sold the majority of my holding for £3.60 per share, leaving a small chunk that is basically pure profit. I would like to add back to this position if it does indeed drop – maybe around the £3 level, where it was before the Covid-19 frenzied sell-off.

Main photo: Screenshot from Fast & Furious Crossroads developed by Slightly Mad Studios Ltd.

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