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SEC Launches Take-Two Investigation
crecente writes "Take-Two, already the subject of a Grand Jury inquiry, is now being 'informally investigated' by the Securities and Exchange Commission. This latest investigation looks at stock option grants made by the company from Jan. 1997 to the present. Just how many investigations can a publically traded company handle before their stock turns to worthless paste?"
"It's okay folks, this is just an informal investigation (tm) so just, you know... go about your usual illegal activities, or whatever. Just pretend I'm not here."
Meta will eat itself
The "article" doesn't say hardly anything about what the news is. Does anyone have a link with some details, like what kinda stock-granting issues are alleged? I initially felt bad for doodling on my Take-Two stock certificates, but they're probably worth more as artwork now...
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Score another one for http://www.sarbanes-oxley.com/. EETimes.com has been keeping a count of other companies in hot water for back-dating stock option grants at http://www.eetimes.com/scandal.html
Since when does the SEC launch "informal" investigations, and more importantly, since when does the SEC acknowledge that they're investigating any company? The SEC is a bit like the Spanish Inquisition (NOBODY expects the Spanish Inquisition!), in that you don't know they're investigating you until they come knocking on your door with subpoenas and start carting aways boxes full of corporate financial documents.
The SEC has launched a very wide ranging inquiry that's touching virtually every major tech company from the 90s. The issue is the backdating of stock options to the stock's lowest price in the period, and how that was accounted for financially. It's not clear what's been done wrong by anyone, and looks like some fairly technical accounting issues will result in some fines for improper handling of the charges. Regardless, this is cleanup of the wild west 90s, when everyone was handing out options like candy. It says nothing about Take Two that it doesn't likewise say about every dot com.
Anyone who loves or hates any language, platform, or manufacturer, doesn't know what they're talking about.
"Just how many investigations can a publically trade company handle before their stock turns to worthless paste?"
One... two... *CRASH* three
It's three
So does that mean that immediately upon hearing of investigatory action the investor in said company should dump all stock? Say they choose that route. Then the investigation reveals that the company was indeed breaking the law. Then it was a wise choice to dump the stock. But what if the investigation reveals the company wasn't breaking the law? Does the stock then get a noticable, predictable bump? I am seriously asking these questions.
It all goes back to the golden rule of investing, which is you buy stock based on the company, not based on the stock.
If a company was hiding serious financial problems, serious investors would have known about it long ago and dumped the stock. It's really difficult to hide financial problems that are so bad that they actually adversely affect the long-term viability of a company. Companies can and do put spin on their financial results all the time, but to actually mis-state what would have to amount to billions of dollars worth of results would be pretty unthinkable. (It's happened in some high-profile cases, but it's hardly the norm.)
In fact, TTWO *did* mis-state quite a bit of revenue a few years back, and they got caught and had to re-state. And it was a decent chunk of change, but it wasn't enough to affect the company going forward, so they took a bit of a hit and went on. Their stock was at 7 at that time but ultimately hit something like 31. If you were an investor who actually *bought* on the day they admitted wrongdoing, you would have come out nicely ahead.
The reason being, of course, that fundamentally the company was still putting out good products that people were interested in buying. If, on the other hand, you knew that TTWO's games weren't selling - if Vice City had only sold 1 million copies, for example, and San Andreas only 500,000 - but they *still* were claiming record profits, then you would start to ask questions. But the bottom line is it's not the result of any *investigation* that should cause a stock to go up or down, it's what that investigation reveals about the company itself. You need to look beyond the superficialities.
If the norm is that after a positive result, i.e. no law-breaking was found, the stock does not go up, then the only logical answer is to dump the stock no matter what when the investigation is announced.
In other words, buy high, sell low, huh? That's not really a winning strategy.
Good investors would have bought TTWO's stock after the negative results of the previous investigation, when everybody else was selling. Those people made out like bandits later on.
A smart strategy, if you're a stock holder that still truly believes in a company after all these investigations, is to simply buy more stock when it drops. This way, you average your costs - if you bought your first stock at 12, and it drops to 8, you can buy enough that your average cost was 10. You'll make more money later, provided the company itself continues to do well.
So in this respect whoever hears about the investigation first gets to lose the least amount of money. Which is to say, probably the company owners and employees. Is that insider trading?
Yes, and it's illegal. And since everybody has to report their buys and sells, it's not really possible to get away with it under obvious conditions like this.
And what of the possbility of a more secretive investigation? Because in this case it certainly seems like the company in question is essentially guilty until proven innocent, and possibly punished before any proof is found. This certainly seems to breach the idea of constitutional rights.
What constitutional rights would those be? So the government is not allowed to investigate anybody because some stupid idiot shareholders decide to sell the first wind of it they get?
Is there really any way to make this less damaging to the companies?
Again, in what way is it damaging? Is this investigation into TTWO in any way affe
Is that the name of their new game? Do I get to play a lawyer?