CD Projekt RED Stock Plummets, Costing The Founders Over $1 Billion

After an extremely troubled release of the highly anticipated Cyberpunk 2077, CD Projekt RED are feeling the horrible after effects of the botched last-gen version of the game. The buggy and failed launched has the company’s founders reportedly losing $1.4 billion in stock value. Their stake was reportedly now worth about $3 billion on Tuesday.

The joint 34% stake in the Polish company is co-owned by three executives--Marcin Iwinski, Adam Kicinski, and Piotr Nielubowicz--along with a fourth owner, Michal Kicinski. These men are now among the wealthiest Polish people due to the anticipation for Cyberpunk. But as the stock has been dropping, so has their wealth.

After closing at an all-time high of $31.00 on Friday, December 4, likely reflecting the expectation of a spectacular launch, the developer's stock fell to $20.50 on Tuesday, December 15, shortly after releasing on December 10. That's a third of the company's stock value gone in just 11 days, with most of the losses attributing after the launch date. Short sellers have also begun targeting the stock, with Markit data showing that the share of short sellers in free float rose from less than 1% in September, to 8.3% on Monday.

The bugged out versions made for the last generation of consoles seem to be the biggest factor in the decline. Many copies were sold on these platforms, and they're significantly buggier and less graphically impressive than the PC, PS5, and Xbox Series X versions. Many gamers are avoiding these versions at this time, which will lead to fewer sales for the project.

Many analysts predict the launch has cost CD Projekt RED significant credibility, which is damaging the game’s success going forward. Average analysts originally predicted 30 million copies for the 12-month sales margin. The number has now been reduced to 25.6 million copies.

CD Projekt Red gave a formal apology for the issues on last-gen systems, and recommended unhappy customers to get refunds. The company noted that it had no special agreement for refunds, and recently stopped recommending them for PlayStation.

However, they now face a battle to redeem the studio's reputation and fix the plagued mess they created for owners of older consoles, which many gamers have not yet upgraded to the latest generation at this time.

“There is now a huge scar on the reputation of both the studio and its management,” Tomasz Rodak, an analyst at BOS Bank SA said in an email. “In only a couple of days, CD Projekt fell from the most adored studio to the most hated one. Restoring trust is not impossible, but would need much time and effort.”

Analysts have differing views on the long-term implications for the studio, which is heavily dependent on the new title. Most agree that the fixing of bugs and other issues will be critical for reclaiming revenue, even as many are saying the PC version is much greater. The stock stopped its free-fall on Tuesday, rising 2.5% at 2:02 p.m. in Warsaw.

“If your only option right now is playing Cyberpunk 2077 on either of the base console platforms, I highly suggest you don’t play at all until its many terrible performance issues are fixed,” reads the popular games website IGN, which recommended that most players should apply for a refund. The site separated its primarily positive PC review from the negative review of the console versions, saying they were like completely different games.

Brokers such as Morgan Stanley and Barclays Plc now predict that preparing the multiplayer component of Cyberpunk, which is critical for long-term sales, may take longer due to the bugs on last-gen consoles. CD Projekt RED plans to issue a strategy update in the first quarter of 2021.