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Take-Two's Further Financial Woes

Posted by Zonk on from the started-splodey-and-got-splodier dept.

Next Generation reports that already beleaguered publisher Take-Two is now facing a lawsuit from a stockholder. The person bringing the suit claims the company has engaged in misleading tactics, insider trading, and inaccurate reporting. GameDailyBiz is also reporting that Elevated Partners are considering a buyout. These latest revelations may put the kibosh on that plan, though. From that article: "So will Elevation go for it anyway? Stranger things have happened, and the GTA franchise would certainly be a very valuable property. Furthermore, as the Post points out, Elevation doesn't seem to be afraid of investing in troubled companies. Just recently, the firm spent $100 million for part of Homestore.com even though several former Homestore executives were indicted for multimillion dollar fraud."

2 of 11 comments (clear)

  1. Lawsuit? Whoop-de-do by hambonewilkins · · Score: 3, Informative

    No offense to the poster, but shareholders sue companies all the time. Nothing ever really happens with these suits and they are certainly not noteworthy. So, that part of the story isn't "news." It's more "traditional business."

    --

    God Bless America. Why? Did it sneeze?
  2. Troubled Companies by nick_davison · · Score: 3, Informative

    Elevation doesn't seem to be afraid of investing in troubled companies.

    So long as you've done a thorough due dilligence and are confident you've uncovered all of the problems, the main thing further fraud announcements do is confirm what you already knew, scare stockholders in to selling cheap, and let you get the same company for even less money.

    Pulling numbers from my rear end:

    Say GTA is worth $100m. The company as a whole is worth $200m.

    Say news about fraud devalues the company down to $120m - really $140m but it swings lower before it normalizes.

    If you can buy it out for $120m, spin off GTA in to something you own, then sell the remainder back for $40m, you've just bought the $100m company you wanted anyway and got it for $20m less.

    Even if you can't offload the remainder for over $30m, that's still a $10m savings.

    Absolute worst case, you get a second company that's currently worth $20m but more like $40m in real assets (just less, right now, due to its reputation hit) and you can break off the remaining pieces and sell them out piecemeal too.

    So, in short, a company nose diving in value doesn't necessarily make it any less appealing to buy.