NIS Issues Securities to Raise Funds, Mainly for Workforce Expenses - News
, posted on 18 May 2019 / 1,540 Views
Nippon Ichi Software has decided to issue new securities in order to collect fresh funds, as reported by Japanese site Game Koryaku Wiki yesterday. Indeed, the precise fact sheet of this financing plan can be found on Nippon Ichi Software's business website.
The company will issue 375,000 new shares in the form of warrants and intends to collect 573 million yen, with Daiwa Securities in charge of the operation. Warrants, as a right to buy stock at a fixed price, are an effective way to raise funds. That said, existing stockholders face stock dilution, which can lead to weaker stock price later on. No doubt Nippon Ichi Software's stock will be closely watched next week and beyond.
What raises questions is the intended use of the cash: 370 million (65%) is dedicated to payroll, 170 million (30%) will be used to pay third party contractors, which leaves only 34 million (5%) for internal investment at Nippon Ichi Software. The plan reveals that the firm will need 1.1 billion yen for workforce in the next three years, so 370 million is a good chunk of that. While the fact sheet says that the funding is aimed at accelerating the development of its IPs in Japan and abroad, Game Koryaku Wiki believes that Nippon Ichi Software's ailing smartphone game business could be the real reason behind the sudden need for financing.
Having launched on March 19th, Disgaea RPG
for smartphones has undergone a lengthy period of maintenance and the service still hasn't resumed to-date. Nippon Ichi Software has an entire team in Osaka
in charge of the smartphone business, which means the company currently has no revenue to cover the development costs in Osaka. Developer Forward Works and Nippon Ichi Software recently urged
all players who have paid for microtransactions in Disgaea RPG
to contact the costumer support department. The notice says that all play data in the game has had to be reset, which probably calls for some kind of compensation for players who have invested real money in the game.
For almost a year, Nippon Ichi Software has seen its sales dwindle in Japan, with no title hitting even 10,000 units sold since The Liar Princess and the Blind Prince
, which happens to be its last PSVita game on the market. It had sold 22,000 units across Switch, PS4, and PSVita by June 2018. The company's most recent title, Murder Detective Jack the Ripper
, sold just 4,000 units in Dengeki's sales ranking three weeks ago. Profits in the recent fiscal term were down 27%
. Nippon Ichi Software has also recently delayed Coven and the Labyrinth of Galleria
by almost a year, fuelling concerns about its current situation.
It's difficult to assess if Nippon Ichi Software is really in financial trouble purely as a result of the decision to raise money; the company may simply be laying down plans to extend the business further globally. Issuing more shares could also be a way to prevent a hostile takeover, as the share price has gone down already. Still, the publisher will have to convince investors if it wants the fund raising drive to succeed, and that might be difficult given the recent weak performance of the Japanese console market and the firm's deadlock in the mobile business. Nippon Ichi Software's next moves should give us further hints on what to expect.