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Report: Take-Two Investors Poised For Management Change?

Report: Take-Two Investors Poised For Management Change?

March 15, 2007 | By Jason Dobson

March 15, 2007 | By Jason Dobson
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More: Console/PC

Building on earlier reports of an effort by Take Two investors to topple the company's current management, new information finds analysts confident that the coalition is poised to enact major changes at the Grand Theft Auto publisher next week, possibly including management and board reshuffles.

Following a seemingly endless string of court battles and financial issues including the recent shares stock scandal, financial site has reported on the group of prominent Take Two investors, including OppenheimerFunds, D.E. Shaw Valence Portfolios, S.A.C. Capital Management and Tudor Investment, looking to remove current CEO Paul Eibeler and bring about changes within the company's board of directors.

This group controls approximately 46 percent of Take Two's outstanding shares, a fact that leads Beth Young, senior research associate with The Corporate Library to believe that the group may well get its wish. "This is very different from the usual situation where a shareholder has about a 10% stake or less and has to solicit for additional votes," stated Young to "In this case they are almost already there."

In addition, according to a SEC filing on March 7, the group does not intend solicit stockholders to vote or withhold a vote in its efforts. "If they already have the votes they need, they probably don't care about giving shareholders an opportunity to vote for their candidates," explained Young in the report, adding: “Unless this company has near-perfect turnout and every person voted for management, it's difficult to see how Take-Two's existing management can get its way.”

While Take Two's Rockstar North-developed Grand Theft Auto franchises has proven to be a successful franchise for the company, its success has come at at a price, the most notorious coming as a result of the now infamous “Hot Coffee” scandal, which resulted in Grand Theft Auto: San Andreas being recalled and re-rated in the U.S.

Take-Two’s recently restated financial results for fiscal 2006 saw revenue fall and the company record a net loss of $184.9 million. In addition, Wedbush Morgan's Michael Pachter recently issued a statement to his firm's clients, calling Take Two's shares “overvalued” and the company's path ahead “troubling.”

The issue is likely to come to a head at the company’s annual stockholders meeting on March 23rd, and most analysts appear to think that the investors will be successful, given the influence wielded by the investment group - though it's possible that the existing Eibeler-headed management team can come to some kind of compromise with investors.

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