LIND RESEARCH
Roblox Opportunity and Undiscovered Value
Coffee Stain (COFFEEB) is a spin-off from the Swedish video gaming group Embracer (EMBRACB). Since its listing on the Nasdaq Stockholm First North on December 11, the share is down about 30%. We believe this drawdown is mainly due to mechanical selling from large index-focused investors that owned Embracer. With that, selling now seemingly over, we expect the underlying company quality and prospects to be better reflected in the valuation.
Roblox undercover: While listening to the Roblox earnings call, we noticed a major algorithmic update that we think will benefit Coffee Stain greatly. Roblox updated its recommendation algorithm to prioritize higher-retention games; we have seen clear positive signs in player data for Welcome to Bloxburg (Coffee Stain owned) following the update. We believe the market has overlooked this.
Unlocking the Iron Gate: Valheim 1.0 is just around the corner; however, we feel the market is missing that, aside from the publishing rights Coffee Stain holds. They also own 30% of the highly profitable game studio behind the hit game (Iron Gate AB). Coffee Stain records the Iron Gate investment on its books using the equity method, which severely understates the true value of its 30% ownership. We believe the market is oblivious to the fact that cash + the Iron Gate stake represents about 33% of Coffee Stain's total market value.
Unique business model, not understood: Coffee Stain's focus on community-driven development creates unique risk/reward characteristics that differ significantly from typical public video gaming companies. In our view, the market is yet to understand the strength of this model and how it should be valued. Growth for Coffee Stain comes in lumps, and we find the market has a hard time grasping that.
Attractive valuation: We increased our position in Coffee Stain in early August to about 11% of the portfolio. We find the company’s valuation far too cheap for its quality and are long-term positive on the outlook. The company is trading at more than a 50% discount to peers while having both higher growth and margins. In the near term, the Valheim 1.0 release will likely be a positive catalyst, along with additional buybacks and the Roblox improvement. We think the company should actively work on reducing the current valuation discount; actions could include a deal with Iron Gate to increase ownership to over 50%, increase IR presence at investor events, and improve pipeline and development visibility.
Info | Value |
|---|---|
Coffee Stain | Price (SEK): 17.4 |
Ticker: COFFEEB | Mcap (SEKm): 3893 |
FYE: MAR | EV (SEKm): 2649 |
Disclaimer
Not investment advice, for informational purposes only. The company discussed, Coffee Stain, is a holding in our public portfolio.
Introduction
Coffee Stain Group (COFFEEB) is a publicly traded (on First North) Swedish video game holding company that develops and publishes community-focused, highly replayable mid-market "indie" and "AA" games primarily for PC and console platforms. Its core portfolio includes six key franchises: Goat Simulator, Satisfactory, Deep Rock Galactic, Valheim, Teardown, and Welcome to Bloxburg.
Corporate Structure
The group operates under a highly decentralized model consisting of 12 independent game studios across Scandinavia (including Ghost Ship Games and Tuxedo Labs). These studios operate with lean, autonomous teams of approximately 5–30 developers who are fully accountable for game development, while a small central organization provides strategic and publishing support.
Spin-off from Embracer Group
Originally acquired by THQ Nordic (which later became Embracer Group) in November 2018 for SEK 317m plus earn-outs, Coffee Stain was officially spun off as a standalone listed company on December 11, 2025. Its Class B shares are publicly listed and traded on the Nasdaq First North Premier Growth Market in Stockholm under the ticker COFFEEB.
Key Management & Shareholders
Anton Westbergh (Co-founder) serves as the Group CEO and is a board member.
Erik Sunnerdahl serves as the Chief Financial Officer.
Jacob Jonmyren serves as the Chairman of the Board.
Lars Wingefors AB (controlled by board member Lars Wingefors, co-founder of Embracer Group) is the largest shareholder, holding 20.69% of the capital and controlling 41.81% of the total voting power.
The drawdown
Since Coffee Stain's IPO, the share price is down nearly 30%. We think most of the selling volume has come from index-focused institutional investors. Meaning that, as Coffee Stain was spun off from the larger company Embracer into an MTF from the main list, many index funds and similar funds had to sell their shares. The spike in volumes in the drawdown chart above is quite telling.
Looking at the shareholder structure, compared with the time of the spin-off, it also shows that primarily Vanguard and NBIM have sold their holdings. The data we have access to is only for the top 10 shareholders, so we do not know movements outside that group.
We think the large passive investors are now cleaned out, and we do not see latent selling pressure waiting for liquidity. With a positive fundamental development, the share price should likely react positively. Some of the decline is due to Deep Rock Galactic: Rogue Core’s early-access releases not fully meeting expectations. The aim now is to listen to the community to further develop the game, which is the reason for doing an early-access launch instead of a full release.
What the market gets wrong about Coffee Stain
Coffee Stain differs quite a lot from its old “parent,” Embracer, and in a sense from most other public gaming companies. Coffee Stain has produced new core IPs over the years, which have built the firm's value. But that development is “lumpy” and unpredictable, and their model makes it very likely that over the coming five years we will see 1-2 new core IPs emerge, while Coffee Stain continues to expand its current franchises.
Community-driven development
What sets Coffee Stain apart is its highly successful and innovative community-driven development model. This approach is not merely a preference but a core operational philosophy that demonstrably drives exceptional Return on Investment (ROI).
Coffee Stain's model prioritizes constant iteration and early player feedback via Steam Early Access. This fosters an engaged community, supports financial success, and mitigates risk. Projects lacking engagement are promptly scrapped, a unique advantage over traditional development, leading to more successful launches and a sustainable business model. The Rouge Core game is a great example; a lower-than-expected EA release does not mean the title is going down the drain; now the actual work starts to act on community-based feedback to make the best product possible before full release. However, because the market is used to full releases, they price it as a true failure.
Game development continues post-release, with 30-40% of lifetime net revenue coming from DLCs and additional content. DLC creation mirrors main game development to maximize engagement and financial success. Additionally, DLCs boost main-game sales through bundles, creating a cyclical strategy for sustainable success.
The strategic emphasis on cultivating vibrant, active communities has yielded exceptional results, directly fostering deep engagement and a loyal following across various social platforms. This intentional focus has transformed passive observers into active participants, creating a powerful network of advocates who not only consume content but also contribute to its growth and propagation.
Coffee Stain's core portfolio features six games, generating over SEK 7.5 billion in lifetime net sales. All but Valheim are in-house titles. The exceptionally high Steam scores across nearly all games underscore strong player satisfaction.
Lumpiness & DLC potential
The model's lumpiness is evident in the historical numbers, as well as in the clear buildup of baseline revenue.
Because of this, we believe it’s incorrect to judge Coffee Stain on a quarter-by-quarter basis, or even year-by-year. You have to buy into their model and judge the likelihood that, over the coming years, new IPs we don’t know of today will be released and that DLC/expansions on core IPs will continue to be developed and released.
A good example of this is Satisfactory, where the company seems to be actively planning potential DLCs. This was CEO Anton’s comment from the latest (Q1’26/27) earnings call:
Question: "Could you elaborate on the monetization strategy across Satisfactory, Teardown, Valheim, Deep Rock? Particularly with the balance between paid DLC and free updates. For example, to what extent did Satisfactory updates drive incremental sales or player engagement?"
Anton:
"First of all, I think we can just say that all of the games have different strategies. They are run by their own. Typically, the studio runs the game. All our core IPs have their own strategies. We think that's the best because if we will have to have just one strategy it would not be the best. We let our teams that are close with the communities, together with the people like me and Erik or the people who work on publishing, we have a lot of expertise within the group. We try to just make the best possible strategy for each different title."
"Generally, I would say that we try to grow the games to grow the games you need to deliver content, you need to make the players happy, and then over time, you want to find a nice way to monetize it that doesn't feel predatory. The strategy that we employ is we recognize that our titles, we're not AAA titles. We're not a total games as a service focused business. We do have some really big, in our scope, titles that we keep. Just look at the results of these games. They keep performing year-after-year. We take a lot of inspiration as well from other similar games, I think, in the industry and we really try to make the best possible decisions at all times around these strategies."
"You could somewhat say that I think that the more mature a game becomes and the bigger it becomes, the more it might go towards something that resembles live games as a service. It's a word that I want to be a little bit careful with using it because I think it also comes with a lot of, what do you call it? That word, it means so much."
Roblox's algorithm update creates an opportunity
Some of the best information about a company can be found by researching other key players in its ecosystem. Because Roblox is launching a new AI builder feature, the company is afraid the platform will be flooded with “sloop” games. Therefore, they have implemented a change to their “Recommended For You”. Here is a direct quote from the Q2 Roblox earnings call:
"There's been resounding support in the feeling that we're moving more and more to evergreen-type games that keep players around for a long-term. Essentially the exact opposite of what might be called, not that we're saying we had it, but more clickbaity or kind of cash grabby type games. We want to be as far in the evergreen segment as we can." (Dave, Q&A)
"We shared with our community our strategic decision to focus our discovery algorithms directly on measured long-term retention." (Dave, prepared remarks)
"We made the decision, as we started going down this next-gen, to go longer into the timeframe to measure signals longer." (Dave, Q&A)
"We are trying to optimize a blend of long-term retention and long-term monetization that's directly measured, as opposed to overly extrapolating from short-term monetization signals that may be chatty and putter out." (Dave, Q&A)
The announced changes can be found in this post, summary of the changes is:
We’ve updated the Recommended For You algorithm signals from 7 days to 28 days to better recognize games that keep players coming back, playing over time, bringing their friends with them, and choosing to spend. We’re sharing the signals and their relative importance so you know what matters.
To us, it’s clear the updates should favor an “old-school” game like Welcome to Bloxburg. They focus on long-term playability rather than quick cash grabs with hard monetization. Welcome to Bloxburg has been around for 11 years, with lifetime visits now at +10 billion (yes, billion). The direct effect of the algorithm updates should first be visible in the New Visits stats, as the game gets recommended to people who haven’t played it before. Hopefully those visits lead to long-term increases in players as they test out the game and keep playing.
The New Visits data shows very interesting signs after the June 15th update;
The most evident part is that the spikes and the daily new visitors are far more stable. This also yields a higher average, since the big swings are no longer there. Evidently, something has changed (which we know it did), and that change appears to be positive for Welcome to Bloxburg.
Financial impact
Then many might say, well, who cares about a Roblox game when Coffee Stain centers around IPs like Satisfactory, Deep Rock Galactic, Teardown, and many more?
Well, the Roblox game sits inside the subsidiary Coffee Stain GBG and is critical to the group's profitability, as it is…
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