Expected future development, notable risks and uncertainties
The Company is exposed to competition from companies engaged in the provision of other forms of entertainment and leisure than mobile gaming.
The Company is exposed to competition both from other mobile gaming companies as well as from companies engaged in the provision of other forms of entertainment and leisure. Competition within the broader entertainment industry is intense and the Company’s existing and potential customers may be attracted to competing forms of entertainment, such as other forms of online games, social media applications, music and video streaming services, as well as offline activities such as traditional board games, reading, watching television, and shopping. These other forms of entertainment compete for the discretionary time and income of the Company’s customers. If the Company is unable to sustain sufficient interest in the Company’s mobile games in comparison with other forms of entertainment, including new forms of entertainment, it could have a material adverse effect on the Company’s business, financial position and results of operation.
The Company relies on virtual app stores to distribute the Company’s games.
The Company relies on distributing the Company’s games through virtual app stores, with the dominant app stores being Google’s Google Play for Android and Apple’s App Store for iOS. The Company is subject to the distributors’ standard terms and conditions for application developers, which govern the promotion, distribution and operation of games on the relevant appstore. The Company’s business could be harmed if a distributor discontinues or limits the access to its respective platform, modifies its terms of service or other policies, including the provisions on share of net sales. The distributors have broad discretion to unilaterally change its standard terms and conditions and any such changes may be unfavourable for the Company, and have a material adverse effect on the Company’s business, financial position and results of operation. The Company’s business could also be harmed should the virtual app stores be unavailable for players or should players experience issues with these platforms or their in-app purchasing functionality.
The Company is largely dependent on attracting and retaining key employees.
The Company’s success largely depends on the Company’s key employees, including the chief executive officer and other members of the executive management, and on the continued ability to identify, attract, hire, train and retain qualified executives, game designers, product managers, engineers and other key employees. The Company’s ability to attract, hire and retain qualified employees depends on a number of factors, some of which are beyond the Company’s control, including the competitive environment on the local employment markets in which the Company operates. The loss of a key employee due to, for example, such employee quitting in order to work for a competitor, may result in loss of important knowhow and may significantly delay or prevent the achievement of development objectives or the implementation of the Company’s business strategy. If the Company is unable to attract, hire and retain key employees, it could have a material adverse effect on the Company’s business, financial position and results of operation.
Business acquisitions and integrating acquired operations may involve uncertainties and hidden obligations and could divert the attention of the Company’s management and otherwise disrupt the Company’s operations.
As a part of the Company’s strategy, the Company may in the future explore, and have in the past carried out, acquisitions to target new intellectual property, strengthen the Company’s market position in selected game genres, and grow the Company’s game development talent. There is a risk that the Company fails to generate the expected benefits. There is also a risk connected to tax liabilities or other hidden obligations related to effected or any future business acquisitions, or that the Company will otherwise face disputes related to its acquisitions. In addition, the acquired companies may have engaged in unfavorable practices that were unknown to the Company before the business acquisition was effected, and which may make it more difficult to integrate the operations, create liabilities or cause other problems. Furthermore, the Company’s estimates and assumptions of effected and planned business acquisitions and their benefits may not prove to be correct. The Company could fail to integrate the operations, systems, technologies, products and personnel of each acquired company. The inefficiencies, lack of control and potential delay that may result if such integration is not implemented, as well as unforeseen difficulties and expenditures that may arise in connection with integration, could have an adverse effect on the Company’s business. Such acquisitions and integration processes could divert the Company’s management’s attention from other business concerns and also lead to the use of resources that are needed in other parts of the Company’s business. Any of the above could have a material adverse effect on the Company’s business, financial position and results of operation.
The Company is dependent on its intellectual property rights and the Company could be subject to allegations of intellectual property rights infringements.
Intellectual property rights are an essential element in the Company’s business. The Company relies on a combination of different intellectual property rights such as trademarks, copyright, design rights, protection for compilations, and trade secrets. Despite the Company’s efforts to protect its intellectual property rights, unauthorised parties may attempt to copy or otherwise attempt to obtain and use the Company’s technology, games or brands. There is a risk that the actions taken by the Company will not be sufficient to protect its intellectual property rights. Should the Company fail to protect and retain its intellectual property rights, it could have a material adverse effect on the Company’s business, financial position and results of operation. There is a risk that the Company may be regarded as infringing intellectual property rights of other parties. Intellectual property litigation may be protracted and expensive and the results are difficult to predict. As a result of any court judgment or settlement the Company may be obligated to cancel the launch of a new game, stop offering certain features, pay royalties or settlement costs, purchase licenses or modify its games and features. Should the Company be regarded as infringing intellectual property rights of other parties, it could have a material adverse effect on the Company’s business, financial position and results of operation.
All investments in securities involve risks
Any such risks could cause the trading price of MAG Interactive’s shares to decline significantly and investors could lose all or part of their investment. Investors are subject to risks relating to share price, liquidity and volatility. The trading price of the Company’s shares has been, and is likely to continue to be, volatile and subject to wide price fluctuations in response to various factors, including, but not limited to:
- market conditions in the broader stock market in general, or in the industry in which the Company operates in particular;
- actual or anticipated fluctuations in the Company’s quarterly financial and operating results;
- introduction of new products and services by the Company or the Company’s competitors;
- issuance of new or changed research analysts’ reports or recommendations;
- sales of large blocks of its shares;
- additions or departures of key personnel;
- regulatory developments;
- litigation and governmental investigations; and
- economic and political conditions or events.
These and other factors may cause the market price and demand for the Company’s shares to fluctuate, which may limit or prevent investors from readily selling their shares and may otherwise adversely affect the liquidity of the Company’s shares. The trading market for the Company’s shares could also be influenced by the research and reports that industry or research analysts publish about the Company or the Company’s business. If one or more of these analysts’ coverage of the Company ceases or if the analysts fail to publish research reports regularly, investors could lose visibility in the Company’s expected financial performance, which in turn could cause its share price or trading volume to decline. Moreover, if one or more of the analysts who cover the Company downgrade the Company’s shares, or if the Company’s results of operations do not meet their expectations, the Company’s share price could decline. Moreover, if one or more of the analysts who cover the Company downgrade the Company’s shares, or if the Company’s results of operations do not meet their expectations, the Company’s share price could decline.
Inability to pay dividends
The Company’s dividend policy is subject to e.g. the Company’s performance and financial condition, possible future acquisitions, expected future results of operation, investments, cash flows, terms of the Company’s indebtedness, other means of distribution, and other factors. In addition, Swedish law limits the Company’s ability to propose and declare dividends to certain funds legally available for that purpose. As the amount of future dividend payments the Company may make, if any, will depend upon the Company’s future earnings, financial condition, cash flows, working capital requirements, the terms of the Company’s outstanding indebtedness and other factors, there can be no certainty whether a dividend will be proposed or declared for any given year, or whether a dividend made a certain year will be maintained the following year.
Research and development
A number of games are in early phase of development, but with a high uncertainty of being released as they need to pass through a number of toll gates on the way to a green light for global launch.