Video Game Maker’s Stock Fails to Score Points

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Although investors are balking at the news that video game publisher THQ Inc. is facing a cash crunch, one analyst said that it’s not game over just yet.

The Agoura Hills company, which has struggled for years, announced last week during its fiscal second quarter earnings that it has withdrawn its annual guidance and is evaluating strategic and financing options, prompting speculation of a bankruptcy filing or a sale.

The news sent the company’s shares into a tailspin. They dropped 59 percent for the week ended Nov. 7, closing at $1.16. THQ was the biggest loser on the LABJ Stock Index. (See page 36.)

A weak quarter contributed to the declining stock price. THQ reported that net sales fell 26 percent to $107 million. The company had a net loss of $21 million, compared with a loss of $92 million in the same period last year.

THQ also reported that cash and cash equivalents were down 52 percent from last year to $36.3 million. The company has hired New York’s Centerview Partners LLC to evaluate options for improving liquidity.

Bradley Safalow, founder of PAA Research in New York, said the company’s underperforming uDraw tablet and weak sales of new game “Darksiders II” have contributed to the cash crunch.

“Three to six months ago, I think they felt like their liquidity was adequate to fund their company for the next few years,” Safalow said, but that wasn’t the case.

Until the company secures financing, it has pushed back the release dates of upcoming games such as “Company of Heroes 2” and the highly anticipated “South Park: The Stick of Truth.”

The company did not return a request for comment.

Jason Rubin, an industry veteran who was recently hired as president, said in a statement that the games need more development before they are ready for release.

“When I joined THQ the company made a public commitment to quality titles,” he said. “I believe ‘South Park’s’ market opportunity is significant. THQ is committed to giving gamers no less than the rich ‘South Park’ game they have been waiting for and deserve.”

THQ’s ongoing struggles have caused some analyst and investor speculation that the company might reorganize under bankruptcy court protection or seek a buyer. But Safalow said it’s unlikely that THQ would pursue those options while it has a slate of buzzed-about titles on the way.

Instead, he predicts that the company could make do with about $50 million in venture capital or private-equity funding. That money would be enough to help the company complete its current lineup of games and come up with a viable business plan.

“The company could sell itself but I don’t think that’s the preferred option,” he said. “If the company can get past these liquidity concerns, it can be what the vision always has been.”

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