(Bloomberg) -- Shares in one of Europe’s largest gaming companies plunged the most on record after a partnership deal worth more than $2 billion collapsed, prompting a slashed profit forecast for the year.

Sweden’s Embracer Group AB dropped as much as 41% on Wednesday after announcing that a “groundbreaking strategic partnership” over a period of six years would not materialize. The company said it had received “a negative outcome” from the unnamed counterparty late on Tuesday night, prior to the publication of fourth quarter results.

“We had a verbal commitment from a company we trust, we had no reason to question that verbal commitment,” Chief Executive Officer Lars Wingefors said on a conference call.

Like elsewhere in corporate Sweden, Embracer has been a prolific dealmaker amid the era of zero interest rates and ever rising stock markets. The company snapped up 110 studios over a period of two years, more than doubling its developer portfolio, as part of an aggressive growth plan. In 2021, it bought Gearbox Software LLC in a $1.3 billion deal and a year later it acquired French board game maker Asmodee for $3 billion.

Now Embracer is facing a less assured future as a result of the canceled contract and delays to other gaming projects. That led the company to slash its forecast for adjusted earnings before interest and taxes for the year ending 2024 to a range of 7 billion kronor to 9 billion kronor ($660 million to $848 million), materially down from its earlier forecast of 10.3 billion kronor to 13.6 billion kronor.

“Investors may take some time to rebuild confidence with management,” said analysts at Svenska Handelsbanken in a client note. They described the news as “a major reset of expectations.”

The change to outlook rounds off an already difficult month for the Kalrstad-based developer of “Tomb Raider.” On May 15, the company issued a profit warning due to delays in closing some licensing deals. The update overshadowed news of an agreement with Amazon Games to develop an open-world online version of “Lord of the Rings.”

Read More: Embracer Slips as Profit Warning Eclipses Lord of the Rings Deal

Embracer on Wednesday said adjusted earnings before interest and tax came in at 915 million kronor for the fourth quarter while organic sales dropped 4%. Cash flow from operating activities totaled 1.6 billion kronor in the period.

“FY 2023/24 is not the year when we maximize the value in Embracer – but we will continue to take important steps and set the foundation for the years to come,” CEO Wingefors said.

--With assistance from Jonas Cho Walsgard.

(Adds share price reaction, CEO comment, further context.)

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