Aeria (3758): Floating on Unreal Numbers

Aeria Inc. has just one mobile game hit, but it likes to talk about it. The Co. has made 13 press releases so far to trumpet the success of pre-release and post-release download numbers. The problem is, independent industry trackers show that the download numbers are significantly lower than the statistics the Co. has showed.

Outside this one game, the Co. has no new hits on the horizon and a track record of failed M&A activity for the last three years. What’s worse, the M&A was mostly funded through stock and warrants and Co. shareholders likely now face dilution.

The Co. constantly needs to have its stock pumped up, but earnings and cash flow are weak with no trigger for improvement.

Recently, the Co. downgraded its auditor to a tiny firm with a track record of auditing clients fined by the financial authorities for improper activity.

We value Aeria at ¥465 per share which implies a downside of over 70%.

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