Our Response to Aeria’s Release Dated Oct. 26, 2017


  1. Aeria admits that their downloads are far less than they advertised

In Aeria’s response to our report, they admit that we are right and that they had substantially and materially overstated the number of A3! downloads by including marathon resets.

Thus, it’s clear to see that in including the marathon resets, Aeria purposefully misled investors into believing that the game was far more popular than it was; also through substantially increasing the number of users. This was false!

After misleading investors, Aeria are now trying to justify their actions but claiming that the marathon resets are important, although not encouraged, and show just how popular the game is. This is deeply misleading in terms of earnings outlook; Aeria had told shareholders that there were an additional 500,000 downloads each month when it was closer to 40,000. It is hard to sustain, never mind grow, revenue when a game is no longer attracting many new users. Investors were led to believe that A3! was gaining many more users than it was.

  1. Aeria’s claim that A3! Is still very popular is dubious

In their response, Aeria claimed that they are managing to keep A3! very popular. If this is true then why according to the app analytics sites, A3! posted its lowest revenue in October 2017 since its first full month in February 2017?

A3! is obviously not as popular as Aeria is telling investors.

  1. Aeria do not deny that they have made poor acquisitions

Aeria made ten acquisitions in 2017 including a number of real estate related acquisitions. It is hard to believe that they would be this active in M&A in such a short period of time if they did not fear that their current performance and stock price was unsustainable.

We pointed out that Aeria had taken a 50% write-down on its acquisitions in FY16 within just one year of making six acquisitions. Aeria did not deny this in their response, in fact they proved the point by trying to argue that two of the six acquisitions have made profit so Aeria are themselves admitting that only a third of their acquisitions generate any profit.

It is worth noting that on February 1, 2017, Aeria announced a reduction of directors’ remuneration as a sign of responsibility for the write-down. Sadly, it does not look like they learnt their lesson.

In light of their previous failures, we find it hard to believe that Aeria could have spent enough time on due diligence when it made 10 acquisitions within just six months from April 2017. There is little chance of any success from these acquisitions and all shareholders will have is further dilution of their shares and more value destruction.

  1. Aeria does not deny our thesis that Ichu generated minimal profit in China

We claimed that…

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