As further evidence of my MBG post Why I Don’t Own Stock In Game Publishers, I present Take Two.
After fending off Electronic Arts’ hostile take over bid earlier this year, Take Two just announced a fourth quarter loss of $15MM, and their projected 2009 estimates have gone from a profit of $1.21 per share to $0 per share. Remember, 2008 was a GTA year, and they still lost money. What was Strauss Zelnick’s take?
“The Take-Two Chairman expressed marked concern about the economic climate, but urged investors that the company is well-positioned”
As an exercise in futility I did a few calculations to see if Zelnick was right in fending off EA’s hostile bid. Let’s see, EA offered $2 Billion in cash in March of 2008. Take Two’s ($ttwo) stock was roughly $15.85 per share before the bid, and the day of the bid, the stock shot up to $26.89, roughly the value of the offer. Zelnick, in classic Jerry Yang of Yahoo’s amazingly greedy style, said the company was worth much more. After several months of haggling, EA pulled out. Today $ttwos share price was $8.43 for a market cap of $654MM, which, for those without a calculator, is over $1.3 Billion less than the earlier ALL CASH offer.
There is no GTA coming out next year, and probably not the year after. If the $ttwo share price is worth a couple of Starbuck cappuccinos at the end of a GTA year, what will it be worth next year? Not $2BB. Good job, guys.
On the other hand, I bet EA is happy they didn’t shell out the $2BB in cash. They just announced more layoffs of up to 1,000 people and the closure of Black Box studio (plus seven others). They are going to need the money to get things turned around.