Take-Two’s Board Gunned Down By Shareholders

Take-Two Interactive (TTWO) is seeing a strange issue today because of a Schedule 13D filing with the SEC on behalf of shareholders.  A group of shareholders have banded together and are going to basically kick the board of directors out of the company.  This strategy goes beyond activist investing because it is essentially a seizure of control without a buyout. 

This group in the filing includes OppenheimerFunds, SAC Capital Management (Cohen), Tudor Investment (Jones), D.E. Shaw, and ZelnickMedia have created a group with more than a 24% stake in Take-Two.  The group plans to vote for a panel of new directors, will ask for the right to replace the CEO and will review the CFO position.  It is unknown if there are others that will try to band up with the group, but that may be a safe assumption.

The group is going to appoint ZelnickMedia as the financial and management consultant.  Here is ZelnickMedia’s fee structure: $62.500.00 per month, annual bonus of up to $750,000.00 and an option to buy up to 2.5% of the fully diluted shares over a 3-year period, plus reasonable reimbursement for expenses.  There are more refined details in the filing, but these turnaround issues could be a rough blueprint for other activist and seizure types of investments.

This is one day after the controversial Grand Theft Auto: Vice City Stories franchise game was made available for PS2 consoles in North America.  It appears that the only remaining issue will be if the investor group offers some hot coffee to the board.

Shares are up roughly 11% at $19.60 on the day and it has already seen more than an average daily volume.  The 52-week trading range is $9.06 to $21.06, so shares have virtually doubled since the absolute lows from its video game recalls, fines, government inquiries, stock options issues, and ousting of leadership.  TTWO used to be a $25.00 and higher stock before all of its issues started biting the company back.

Jon C. Ogg
March 7, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.