Devolver Digital goes private after 95 percent stock crash

When indie publisher Devolver, known for Hotline Miami, The Talos Principle, and Baby Steps, announced its stock market debut, the move already seemed odd at the time.

In 2021, listing on the London Stock Exchange's Alternative Investment Market valued the studio at $950 million. Devolver boss Douglas Morin said at the time:

IPO is the right choice for us to ensure continued growth and support the creation of even more great games.

Now, according to Game Developer, Devolver wants to leave the exchange and go private again. The reason cited is that "the global video game industry has experienced a period of significant disruption and volatility." The company's shares are currently valued at just $44.6 million, marking a staggering drop of 95.3 percent.

In a letter to investors dated August 6, Devolver laid out a plan to delist from the UK exchange, along with "a proposed capital return of up to $5.0 million in cash to eligible shareholders and depositary interest holders via a tender offer, subject to shareholder approval."

That kind of language feels unusual coming from a studio known for outrageous stunts, bold marketing campaigns, and a deliberately offensive fictional CFO named Fork Parker.

In a much more serious tone, Devolver attributed the reversal to the unstable state of the gaming industry in recent years, which "has been marked by widespread layoffs at studios and publishers, platform consolidation, and significant write-downs across the industry."

The publisher added:

During this time, Devolver has faced a number of operational and market headwinds, including several write-downs on underperforming titles amid an increasingly competitive and unpredictable market environment.

As a public company, Devolver has consistently faced the challenge of delivering growth in line with market expectations despite difficult sector conditions, resulting in a valuation gap that fails to account for the long-term and extended revenue patterns typical of the video game business.

Devolver believes delisting will save $1.6 million annually. It also argues that the current share price, which crashed to $0.10 overnight following the announcement, doesn't reflect the company real value, since the market never rewarded the publisher for its financial gains in recent years.

Going public seemed like an unusual move for such a small company dealing exclusively in indie games. But it came right after the massive success of Fall Guys in 2020, which brought in $150 million, and Epic buying Mediatonic in March 2021. That cash windfall may have been what pushed Devolver toward some strange financial decisions.