Glu & The Risk of Conversion

March 18th, 2009 by Arjan Olsder Posted in Companies & M&A | No Comments »

Though company remains struggling to hold their position within the changing mobile games market, one great lesson to learn is that conversion can lead to loosing money for nothing.

We went through their latest 10-K form and discovered that the company has actually lost a lot of money due to currency fluctuations. Though it's pretty normal for big companies to suffer from this, it is important to keep an eye out for such issues. Next to that, the form mentions that there is a risk that the company will not be able to repatriate it's Chinese money in time for it's repayment obligations.

“In 2008, we recorded a $ 3.0 million foreign currency exchange loss primarily related to the revaluation of intercompany balance sheet accounts”

“We face additional risk if the currency is not freely traded. Some currencies, such as the Chinese Renminbi, in which our Chinese operations principally transact business, are subject to limitations on conversion into other currencies, which can limit our ability to react to rapid foreign currency devaluations and to repatriate funds to the U.S. should we require additional working capital. In particular, we intend to repatriate between $4.0 to $5.0 million of available funds, no later than the quarter ended June 30, 2009, to satisfy our note repayment obligations. If we are unable to repatriate these funds within that time frame, it would have a material impact on our financial condition and cash position.”

There is a lot more interesting stuff in this document, but it's getting late… so maybe later!

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    Arjan Olsder is the Vice President of Pixalon Studios. Opinions expressed on this publication do not have to represent those of Pixalon Studios.


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