JAN. 29, 2014 • Økokrim (the Norwegian National Authority for Investigation, Prosecution of Economic and Environmental Crime) is investigating Funcom N.V. regarding possible violation of Norway’s Securities Trading Act. At issue is financial information given by the MMO game developer to the market regarding The Secret World from August 2011 until the launch of the game in July 2012, and the two months following the launch. Suspecting market manipulation and lack of disclosure of insider lists, Økokrim officials and police raided Funcom’s offices in the Oslo suburb of Skøyen where they seized boxes of documents, as well as computer equipment. Funcom employees were sent home for the day and trading of the publisher was halted for a time on the Oslo Stock Exchange. According to Norwegian financial web site E24, Funcom has been under scrutiny since 2012 when Funcom management sold off significant share holdings right before the dramatic share price decline that accompanied The Secret World launch. Funcom executives have not commented on the raid, but Økokrim has announced that the company is cooperating fully in the investigation.
Impact: Last month a class action lawsuit was filed against Electronic Arts accusing the publisher of manipulating the market ahead of the release of Battlefield 4 to allow executives to sell of stock at a higher price. Now Funcom has been raided by securities regulators in Norway based on very similar accusations. The situation for Funcom is far more serious as this is an official investigation and European authorities will be far more rigorous than any discovery procedure that EA may have to put up with in defending against its lawsuit. Funcom doesn’t need more bad news. The MMO developer has a reputation for quality, and sometimes innovative, games. But the last five years have not been kind to the company. MMOs require huge investments and The Secret World did not sell well by any measure. Prior to that, The Age of Conan started off with a bang but lost too many users in the months after release. For the third quarter of 2013, revenue fell to $5.3 million from $10.9 million compared to the same period in 2012. Funcom has an official LEGO MMO in the works that was expected to reach open beta by the summer of this year. For a small Scandinavian developer dependent on investment capital to operate, a negative outcome of a full-scale securities investigation could have serious ramifications on Funcom’s ability to finish LEGO Minifigures Online, which Funcom needs to succeed in order to survive.