Online gaming company Zattikka suffered a precipitous decline on the London Stock Exchange today, falling a staggering 64 percent in normal trading. The cause of the plummet is simple: Zattikka is behind on its loan repayments and today confirmed that discussions are ongoing with its creditors. That is troubling given that a loan payment of £0.275 million, which was due on the 9th of this month, remains unpaid. The debt owed comes via a firm that Zattikka purchased, Hattrick.
According to StockMarketWire, the company must pay the sum by the end of business on August 2, or the loan holders will demand their full debt be paid in two business days, which is €6.4 million. It’s a simple assumption to make that if Zattikka cannot make the small-interest payment, the full debt is also outside of its current financial capabilities. That means Zattikka is not long for this world.
Zattikka is a company that went public at a far younger age than most firms, raising $20 million in the process. Those funds were used to acquire a number of smaller gaming companies, including Hattrick. As TechCrunch reported at the time:
Zattikka [...] says that it will be using the funds to make acquisitions, starting with three smaller social games developers: Hattrick Holdings, Sneaky Games, Inc. and Concept Art House, Inc. That is a sign not just of more transactions in social/casual games but also of increasing consolidation of smaller, independent studios as the market continues to mature.
However, it appears that the company, once sporting a valuation north of $20 million at the time of its flotation is now essentially without worth. Google Finance pegs the full market capitalization of the company at $333,274.
The irony is strong: Employing Google’s valuation figure, the mere interest on the debt that Zattikka must pay is worth more than its entire business. This is one story that is almost over, and doesn’t have a happy ending.
There are, of course, parallels with online gaming outfit and publicly listed Zynga, which has been coming under severe Wall Street pressure post-IPO. And in fact, Zattikka has at times been called the “Zynga of Europe,” though Wooga would have something to say about that. It’s also not the only European player in the online and browser-based games space to be facing difficulties, as the casual gaming market is undergoing a transition, to put it mildly.
As we noted when Hamburg-headquartered Bigpoint announced its new CEO after founder Heiko Hubertz stepped down, the industry began facing a wave of challenges, the biggest being market saturation and trying to drum up loyal gamers from a savvy but fickle user base. That’s because the online gaming space has moved from being a market that was underserved to somewhat of a gold rush, with supply outweighing demand. As a result, consumers are wising up, particularly casual gamers who now expect a greater level of quality from an industry that has become plagued with “me-too” offerings and an avalanche of sequels.
But of course the biggest attack has arguably come from mobile, where the major browser-based games makers, not least the Zyngas of the world, have been caught woefully short. Zattikka, as TechCrunch noted at the time of the company’s public offering, is involved in mobile gaming, although it clearly found the change in focus difficult; the market shift from online social gaming to mobile gaming has created more than one corpse.
It’s worth noting that pushback is accumulating against gaming companies employing traditional fundraising techniques. TechCrunch’s Kim-Mai Cutler noted that the hit-based gaming industry leads to rapidly growing companies that might fade quickly in the near future. This makes valuing their long-term worth difficult, as their future cash flows are opaque. Caveat emptor.
Top Image Credit: Jo Jakeman