Star Citizen Breaking News

[Greggy_D]

Clearly there's a new push for SQ42.

You're right.  Clearly they think it's the easiest to bang out in the shortest amount of time vs. The Verse SC MMO.

[Judge_dolly_OG]

Apparently SQ42 on consoles is a thing again

https://twitter.com/dsmart/status/1077272581974175744

But muh FIDELITY!? :((((((

[N0mad]

Clearly there's a new push for SQ42. I wonder if the new investors are holding Chris's feet to the fire and making sure he gets things done as promised.

OR, since Keith Calder is a film producer. Maybe when Chris can't make the game before the money runs out, perhaps the investors will own the SQ42 rights and make a movie out of it? Better yet, it could be a CG sci-fi series since they can use all the mo-cap work and art assets. I bet Netflix would pay top dollar for something like that. They could even keep Chris Roberts on as a "consultant".

[dsmart]

I wonder if the new investors are demanding things like this.

I don't think so. They already know that whale milk saturation is a thing and that SQ42 needs to make money. It won't make as much because they already pre-sold so many units already. So it makes sense that they would at least consider bringing it to consoles. Especially since SQ42 isn't as big as Star Citizen, doesn't have the networking which is one of the most problematic areas etc. Also, early access is a thing on consoles no; so they won't even be subject to stringent guidelines.

[Bubba]

Okay, but I still don't see it. Maybe the VCs can get an animated space movie with mocapped bits by Oscar-Winning talent, but that's not gonna clear 46 mil. There just aren't any other assets worth much, and Sq42 on consoles is not gonna be a blockbuster. Shucks, six years, and they haven't shown gameplay that's actually fun?

[Caveat Emptor]

Maybe when it all finally comes crashing down, the new investors will produce a movie chronicling the whole shitshow.

It will be a comedy .

[Motto]

A comedy, really? Not a sci-fi about a cult?

[Spunky Munkee]

Here is where they will make their money.

They will follow in EA's and Bethesda's path and monetize the shit out of it. Yes, Even Squadron 42. As you said they sold it to mosxt of the limited market for that style game. It's a sort of captive audience just as Star citizen is. You have to know that Robbers had plans to monetize Star Citizen shamelessly. He could change everything that drives the market at will. The number of "random" pirate attacks, how large the swarm is, the cost of missiles and fuel, repairs and insurance along with things you havent even thought of before.
What is to stop a similar but not quite so burdensome set of costs that an occaisional $10 here or there wont help? He wont call them loot boxes but supply boxes. You can fly annoying time consuming grindy missions or just buy his supplies for cash.
 The only stupid people here are his backers who blindly throw money at him as if it was flowers at the feet of the Messiah. Robbers investors plan on getting return on investment asap. I wouldnt be surprised to see robbers become a figurehead whose sole purpose is to be the face of the company and to raise cash.

[jwh1701]

Here is where they will make their money.

They will follow in EA's and Bethesda's path and monetize the shit out of it. Yes, Even Squadron 42. As you said they sold it to mosxt of the limited market for that style game. It's a sort of captive audience just as Star citizen is. You have to know that Robbers had plans to monetize Star Citizen shamelessly. He could change everything that drives the market at will. The number of "random" pirate attacks, how large the swarm is, the cost of missiles and fuel, repairs and insurance along with things you havent even thought of before.
What is to stop a similar but not quite so burdensome set of costs that an occaisional $10 here or there wont help? He wont call them loot boxes but supply boxes. You can fly annoying time consuming grindy missions or just buy his supplies for cash.
 The only stupid people here are his backers who blindly throw money at him as if it was flowers at the feet of the Messiah. Robbers investors plan on getting return on investment asap. I wouldnt be surprised to see robbers become a figurehead whose sole purpose is to be the face of the company and to raise cash.

I could definitely see that happening if they can get a product out the door. F76 has been a terrible failure with bethasada ripping off customers with false advertising on the helmet and rum. Even after all the disasters since the launch they are talking about loot boxes.

[Bubba]

Yeah, but the problem remains. If you look at the project with VC eyes, you're looking for 10x ROI. Star Citizen, Sq42, and every monetized piece of junk would have to clear a billion for these guys to hit that.

One question the SC fans consistently fail to ask each other is "what do you expect to get from this?" And yet they write lengthy bits of fiction about what their SC life will be like, replete with impossible game mechanics.

What do we know about these investors and their expectations. Well, Chris has made it clear that they're not passionate about Space Sims, so they're not angel investors.  The opportunity they see is one of cutting out the big labels via crowdfunding.
In other words, they see a pitchman who's raised 200M, and figure that, if he can deliver on this, he can probably treatise 2 Billion. So they give him the cash to "finish the game."  What happens when that's not enough?

[StanTheMan]

So they give him the cash to "finish the game."  What happens when that's not enough?

I think Derek is saying they would use the losses to offset tax liabilities ...in other words they wont lose any $, CRoberts and his mates will bugger off and the Backers will be left with our laughter ringing in their ears.

[dsmart]

I think this exchange better explains it.

Wayshuba posted:

Sure, this will be a bit long but I will do my best to keep it as concise as possible.

While the investors have only 10% of the company that does not mean they are only entitled to 10% of the money in a sale. It is highly unlikely, with the amount of money involved that they took a straight 10% common share allocation. While the exact terms of the CIG deal are unknown, we can base it on what are usual terms for PE investors in a deal like this and those would be a preferred position with a 1x-1.5x liquidation preference. For sake of this example, I will use a preferred 1x liquidation terms. Keep in mind when it comes to private equity (PE) profit means absolutely nothing.

PE investors care about two things when you take their money – what is the most likely return and what is the exit strategy (i.e., the point where they get there money). That means two things – either selling the company or going public.

What this means is that if CR sells the company preferred investors are entitled to money before anyone else and a 1x liquidation term means they get their money back first.

So if CR were to sell the company for $150 million to a large publisher, the investors would first be entitled to $46m of it (1x liquidation), then they would get 10% of the remainder – so $10.4m – before anyone else does. If there is debt on the company, it would be paid AFTER the preferred investor gets their money out of CRs proceeds. This means the investors would get $56.4m on the sale. CR also mentioned he owned 75% of the company, so he would walk away with $78m in his own pocket.

Based on the roadmap and financials, CIG is burning $12m/quarter and this amount basically means the investment gives them a one year runway. The roadmap has made it clear they will not have a final product for sale until sometime, at best, in Q3 or Q4 of 2020. Which means they cannot have a revenue stream until that time. The goodwill of backers is NOT a revenue stream. Furthermore, CR must see that that source is starting to decline otherwise he never would have went for outside PE.

So, let’s say SQ42 finally does release in Q3 2020. How much revenue does anyone really think they are going to make? Most of that product is owed to backers as debt (i.e., has already been paid for) so now it is a matter of how many you will sell to non-backers. How many copies does one realistically think they will sell of SQ42? Maybe 1m-2m more? So maybe another $75m-$100m. But what if the backers represent 90% of the buyers and you release to only another $20m in sales. That would smash the value of the company.

This is why right now in 2019 CR will get the highest value for the company – before releasing a product – and from a business perspective why it is best to sell the company to a large publisher. If he does, his investors make a return, he becomes uber-wealthy, and a big publisher with deep pockets then has the responsibility to deliver to backers. If he releases and it bombs, all of that goes away. From CRs perspective, it is financially smarter to unload this turkey BEFORE releasing a product.

Hope that clears things up

Derek Smart posted:

Also anyone who knows anything about investment, will notice that this valuation is meaningless because these awful financials basically means these investors probably used Liquidation Preference & Convertible Notes conditions in their purchase agreement. In fact, it’s the only thing that makes sense for them to have given up $46M to someone who, after six years, couldn’t build a single game with $211M in free money.

Wayshuba posted:

I see the exact same play he does (though I wouldn’t push for convertibles, but rather an up on the liquidation preference with a straight preferred position).

The financial upside to CR at this point is to sell the company. This investment gives him the runway time to do that. CR is, and always has been, about the money. Don’t fool yourself as it is his long history. If releasing the final product could make him more money he would take that route. But his best play here, at this point, is to sell the company.

Derek Smart posted:

With investors (NOTE: We have no insight about the US side of things) now having so much money in the project, and with an installed $46M babysitter, we’re now entering a new dawn which I firmly believe signals not only the end of this farce, but also lawsuits abound. The difference this time is that there’s no EA or Microsoft who have the capacity to kick Chris out, rebuild etc. Instead, with someone like Dan who has extensive knowledge and experience in the industry, once this fails – as I still fully expect that it will – he’s just going to sell everything and have his clients take what they can from the proceeds, while writing off their losses as a tax incentive.

Wayshuba posted:

PE Investors invest to make a return on their investment. They could care less if you a making a pet rock or have the cure for cancer. They only care about a return.

That being said, where is the play here to make them that return? Simple.

They most likely came in at a Preferred Position and with a 1x to 1.5x liquidation preference. Any other way wouldn’t make sense.

CR didn’t go to the publishers because they are the target for the next move.

Now, let’s say CR sells his company to Activision, EA or Ubisoft for $250m. Pocket change to them. The outside investors, with a $46m 1x liquidation would get roughly $66m of that (not a bad return for probably less than 12 months investment). Then any remaining shareholders (most likely just CR and his wife) would get the remainder (so CR walks away with over $180m).

Then you now have one of the big publishers with the burden of delivering the final product – ala Digital Anvil.

And backers will eventually get their product as a result (except is will be drastically less than expected) and CR is off the hook for it and walks away a very rich man.

Well played on his part.

[N0mad]

That's a really interesting read.

Thing is, why take the Private Equity investment before going to the publishers to try and sell CIG? I can only imagine that it's because CR has already tried and failed to offload the company onto a publisher. So presumably that's what Dan Offner is there for - to try and get the company into a state where a publisher would be willing to buy it. The $46m investment is to give him time to work his magic.  Just a theory.

[Bubba]

The "1-year runway" is to get the project in a position where someone would want to buy it. The thing is, as Derek implies,  there's not gonna be some big industry player wanting to buy a game built on the crowdfunding premise that the big labels won't support a cool space game: even if the damn thing worked, all a big label would get would be grief for ruining the vision of an already-blind man. CR's best hope is someone like Amazon, with tons of cash, an interest in getting into the market, and having a proprietary platform involved, so they can't see how broken things really are.

I still don't see it happening.

[StanTheMan]

The game is either a lemon or it isnt.

Why would a games developer buy it off Chris if it is a lemon ?