Kotaku
Take-Two is apparently the object of a class-action suit by one of its alleged shareholders who claims, basically, that the circumstances surrounding Take-Two's refusal to sell to Electronic Arts are so fiscally irresponsible it's criminal.
Yesterday, we discussed the strategies Take-Two undertook to try and stall or thwart EA's bid. They've been refusing to talk with EA or explore offers, and they're doing their best to entrench the current Board of Directors with that compensation boost that features stock that takes three years to fully vest. They also implemented that stockholder's rights plan — the so-called "poison pill." As it turns out, someone who is allegedly one of Take-Two's stockholders is none too happy with these tactics — and he's ticked enough that he's taking the company to court.
Take-Two disclosed this morning in a filing to the SEC that the alleged stockholder, one Michael Maulano, filed a class action complaint on April 11th against Take-Two and it's eight-member directorial board in the Supreme Court of the State of New York, where the company's headquartered. Maulano calls Take-Two's tactics a breach of fiduciary duty, and the suit also alleges that Take-Two's responses to EA's offer contained "misleading and incomplete" information.
Maulano wants "declaratory relief, preliminary and permanent injunctive relief, damages, and reasonable attorneys' fees and litigation expenses," and it is unclear how many other shareholders, if any, are part of Maulano's class action suit. Take-Two was not immediately available for comment on the suit, but said in its disclosure: "The Company and its Board of Directors believe these claims lack merit, and intend vigorously to defend against them."
This is a different lawsuit from one filed last month by Prickett, Jones & Elliott on behalf of Take-Two shareholder Patrick Solomon. Solomon aims to sue Take-Two management over the controversial compensation boost.
Bonus info: Why take Take-Two to court rather than simply make a proposal for a vote in the annual meeting? As we learned yesterday, only shareholders who bought Take-Two stock before the cut-off deadline can submit proposals or vote at the meeting — and those that bought stock after EA's bid aren't eligible to vote. It's unclear how long Maulano has been a shareholder, but even if he is one of those able to vote, it may be that there wouldn't be enough people on his side of things at tonight's meeting.
Later this evening — 6:00 PM Eastern Time, to be exact — Take-Two will hold its annual meeting for investors. When Kotaku spoke to some analysts yesterday to help lay out exactly what's been going on regarding EA's aggressive bid to buy the company, and we learned that today might turn out be a very big day for progress in that arena.
EA also revealed this morning that the Federal Trade Commission has filed a second request for information on the proposed transaction, so that it can investigate possible anti-competition issues — though the FTC has drawn no conclusions yet, and requires more time to investigate.
We'll follow this story as it develops throughout the day and keep you posted.
Comments
Ugg really i don't hate EA i just dont want to see one Game Company rule the whole industry. This is madness! 12 more days boys and girls...
wow, so if a company want's another so bad just go after there shareholders?
seems EA is being the bully here by making T2 sell when it obvious they have a sign "not for sale" posted on there doors.
on a side note i was reading your post and im not making fun of it but i was wondering what would be the proper symantics
" Why take Take-Two to court rather than......."
or should it be
"Why Take-Two to court rather than simply....."
lol just wondering.
Don't worry, he actually burned alive 6 years ago
clicky
EA are starting to become the Microsoft of gaming.
I really try not to buy their games unless absolutely necessary now.
I know I'm not making a big difference, but we have to start somewhere.
I hope GTA4 gives them enough money to fight these guys off.
i agree. the antitrust lawsuits should be flying in if this kind of takeover continues,like it did for Microsoft.
2K sports and EA sports. No wonder EA aren't increasing their offer, what with all those brown bags being passed around to people in the FTC.
@Woodwater:
Isn't Microsoft "the Microsoft" of gaming?
@Dakobah: wow, so if a company want's another so bad just go after there shareholders?
The shareholders *are* the company in a publicly owned corporation. They are the owners.
The guy's lawsuit is probably ridiculous, but it's the shareholders that any company has to answer to.
The post is right in questioning why this wasn't just brought up at the shareholder meeting rather than in a lawsuit, though.
This is getting stupid on both sides... Obviously T2 doesn't want to sell so they are trying to stop EA but at the same time its turning into a he said she said...
Have you noticed how in all their statements, EA is acting kinda *****y trying to act like they are a kind step dad trying to help out some troubled kids and the kid (take two) is being a stuborn jerk at their own expense.
While T2 is doing some shady stuff... it wouldn't have come around had EA not tried to take over... And EA is/are? no company to hold in high regard
Another reason a shareholder might sue instead of just presenting a proposal at the meeting is that some lawyer convinced him it would be a good idea. It costs the shareholder nothing to be a plaintiff in this type of suit, but the potential payout for the lawyer is huge. That's not to say this guy's suit doesn't have merit, though.
@Nitemare1: only in america. thank god.
@iGRIND: Thanks for ruining the ending.
Remember to mark for spoilers next time.
@Dakobah: You have to remember that T2's CEO and board members do not own the company - the shareholders do. T2's officers employed to run the company on behalf of the shareholders, and they owe the 'fiduciary duty' to act in the best interests of the company's real owners - the shareholders.
There's nothing shady about EA's tactics. EA tried to cooperate with T2 in the merger but T2 refused. EA is now bypassing the board and directly asking the shareholders to sell their stocks to EA. They'll sell only if they think EA made a good offer - there's no bullying to this.
This sounds kind of dumb. It's his choice to invest in Take-Two, if he doesn't like it he can sell his stock, but they have every right to refuse a merger with the biggest gaming conglomerate in the business.
T2 HAS to do some shady stuff if they want to make it out of this with creative freedom over their own intellectual property!!!
In 12 days T2 will be launching a killer App. its not supposition, its a fact.
There is no way GTA4 is going to bomb, and EA needs succeed in this acquisition NOW.
Or the price of one of gamings best developers will go up.
If you, as a company, issue stock, then the purchasers of that stock become part owners of the company - they own a "share" of the company.
If someone with a lot of money to spend offers the shareholders a price that is higher than the current share price, and 51% or more of those shareholders agree to sell, the buyer then become the primary shareholder - in effect buying the company.
I can see where the shareholders who WANT to sell their shares to EA at EA's price have a case. They are in it for the money, and at least if you believe in capitalism that is a vaild argument.
Personally, I feel that having more companies producing products is a better plan than having only one or two companies, but the investors in most cases don't give a hang - they just want to make money.
This is why government regulation can be a very good thing, ladies and gentlemen.
k didnt know that.
This is what EA was hoping for. Make the offer irresistible to a shareholder or group with enough money to start a suit.
The thing is, Take Two is stretching it until next weeks when GTA is out and the money pours in and the shares go up. Then they can say "see, the stock value is much higher than what EA offered". Until then, all they can do is stall.
>Take-Two's refusal to sell to Electronic Arts are so fiscally irresponsible it's criminal.
A company refusing to give away ownership? HOW DARE THEY!
@Scruffylookin13:
Haha, while this might be "getting stupid" on both sides, this is pretty much business as usual in the world of big time mergers and aqcuisitions. Every single thing that has happened is pretty much scripted beforehand, even the lawsuits that get filed.
When did Leigh Alexander join Kotaku?!!!
You hate Destructoid now, Leigh!
:(
The directors of a company have a duty to the shareholders of that company.
If T2's directors - who are the ones most directly involved in this type of decision - were rejecting an offer that would benefit those shareholders, and doing so because of self-interest (i.e. knowing that EA will replace them as directors after the buyout), then they would be violating that duty, and a shareholder would have a legal claim against the directors.
Proving that would be difficult, however, as there would be many legitimate reasons to reject a buyout.
"take Take-Two to"
Me head hurts
@Woodwater:
I was going to pick up POrtal yesterday, then I saw the EA at the bottom of the security sticker. Picked up Sins of a Solar Empire instead.
@Scruffylookin13: Take-two has had plenty of its own drama prior to the EA bid. Just two years ago, they virtually replaced their entire board and brought Strauss Zelnick on.
As Leigh so eloquently put last time, Zelnick was brought in to add value to Take Two and in essence prime it for a takeover.
EA just jumped the gun early which did not please Zelnick. They are trying everything they can to slow EA down at this point.
The shareholders have every right to be wary of Zelnick's intentions - they are afraid that he may cost them a lot of money by rejecting the EA deal outright.
@badasscat: That's easy - it is for publicity prior to the shareholder's meeting. If it comes out that the person in question bought his shares after the EA bid, then I'm sure that will make a big difference.
@Dakobah:
What youre missing is the fact that management of a company do not own the company, they are supposed to be there to run the company in the best interests of the shareholders. By not even going to the negotiating table, they hardly have the shareholders interests in mind here. I would sue the crap out of them too, its ridiculous. Management has a fiduciary duty to listen to all offers and then make the decision, not to just blindly say no to everything because it is in their personal best interest from a compensation point.
@NeoAkira:
Some people in the stock game like holding onto stocks for long periods of time. I know that day trading, flipping, and other short-term stock investments are the big thing right now, but not everyone is into those schemes when investing.
If this is a guy that wants to hold on to stocks for years hoping for a company to build into something huge then he has every right to voice his complaint it meetings, private correspondence, or legal action. The main duty of a publicly traded company is to their stakeholders (stock holders, bond holders, employees, pretty much anyone that depends on the company in some way). T2 is free to run the business however they want as they are the managers (but don't own all of the company), but if a stakeholder feels the company isn't holding up its end of the bargain (improving the company is whatever aspect they feel is most important), they have a list of things they can do to make their displeasure known. This guy has chosen litigation over other options.
I wouldn't blame them; EA is shit. :/
So how much did EA pay to plant this guy?.
What is this management team doing?, all they had to do in the board meeting was scan the copy of Variety and stick in the shareholder's faces.
Yes, Strauss gets a big whoo-deed-do, but my god; Bioshock and GTA just started to flicker. Get spieldberdego and the writer of Seven to take a dip into Rapture; the man is making a game already.
Can the shareholders not wait 2 weeks for the 2nd biggest game of this gaming generation?
If you are so desperate to sell for some quick cash then at least wait until GTA comes out, the first week passes THEN sell. I am not a stock market expert but i do know that a company putting out a game that can and will sell multiples of millions in 1 day alone will do SOMETHING (positive) for a companies quote.
@Nitemare1: Touché. :D
@Zaos:
Ok quick stock valuation lesson for ya and others here. When you buy a stock and you want to know how much you are paying for it from a valuation standpoint, its usually done by taking the estimated company earnings and multiplying it by a certain multiple.
These estimated earnings that you use are usually ONE YEAR FORWARD earnings. Meaning, people who have bought this stock already are looking into 2009 earnings. You dont buy a stock on common knowledge, there's no edge. People who own the stock already know GTA is going to be popular and already have the revenue associated with the product cooked into their earnings estimates. GTA is already reflected in the stock valuation, as I believe the previous article here stated.
@Zaos:
Not always. The stock market runs on speculation. This is not to say that T2's stock won't jump when the game comes out, but after GTA Vice/San Andreas the people holding on to T2 stock know that GTA4 is going to sell boatloads of copies this fiscal year. Most of the big stockholders do a megaton of research, analytics, and forecasting, so I doubt that they don't know that GTA a huge series that will sell millions of copies. Also, once the game has been out for a few months and the stockholders see that T2 doesn't have another big game coming out until mid-late 2009, the stock is going to dip quite a bit.
Stop with the EA bashing already. They're just a company out for some profit. Their games sell so why blame them? If you don't like their games then don't buy them. There's enough other games out there for you. I like EA. Sure there are better games than what they make. But there's worse games too.
Some of you guys are like the goth kid that bitches about their favourite band going commercial and selling alot of records.
EA is a multinational million dollar company. They need to do stuff like this to stay alive. Welcome to the world of buisness.
I'm actually getting surprised that EA is getting that desperate to get T2.
EA is a bully, and Capitalism is some kind of crazy vampire.
"a breach of fiduciary duty"? Like, "my free money isn't coming in hand over fist enough, and it's YOUR job to make my money happen, and fast"?
If there's anything I can't stand more than Capitalists, it's self-important but in actuality useless do-nothings that think they're King Shit of Turd Castle, and also that they should be rich just for being alive and an American.
@Dakobah: "they have a sign "not for sale" posted on there doors."
They are a publicly traded company. There's no such thing as "not for sale".
@Zaos:
GTAIV will not affect the stock price of TTWO unless it does significantly better or worse than it is expected to. Investors are not oblivious, they know GTA is coming out, and they have already factored that into their valuation of the company. Therefore, the stock price already reflects the anticipated earnings that GTA will provide for the company. The only way this valuation will change is if the actual sales when it releases are significantly different than the predicted earnings. It's highly unlikely that the sales of GTAIV will exceed expectations by enough to change the share price.
@Andy D.: It's the same strategy EA used when they purchased Bioware and Pandemic prior to Mass Effect's release. I mean, hello?
Their stocks shot up when Mass Effect sold well, and if they get their hands on Take Two, their stocks will shoot up even more.
Unfortunately, our government regulation system does not work very well in software industries. Hence why Microsoft wasn't broken up into smaller companies when the antitrust suit failed.
So, yeah. EA is getting pretty dumb right now, and I'm not really pleased with the shareholder's lawsuit either. He obviously doesn't realize that he would make cash by simply waiting for Grand Theft Auto to release, then stocks go up, sell, simple.
Alas, some human beings are the lowest of the low.
@SpishackCola:
That makes sense too, thank you for the explanation.
@Cchrist: Rampant Capitalism is what I'd like to call it. When a company clearly wants to control a large section of the market with very little competition, then that's a problem.
Our economy survives with COMPETITION from one another, and if there's a monopoly, then there's a problem. I mean, hellO? Windows Vista, anyone?
@NKato: Oh there's no competition for EA? I never knew.
@Manny: In my opinion, I think that shouldn't be how it is. Companies that deal in creative properties should at least have a management choice to not sell in order to preserve the integrity of said creative properties.
Remember, EA has something of a Midas/Death Touch to everything it comes into contact with. 50/50 chance of the new properties they acquire dying a horrible death.
@Ginetta: I agree... the benefits that Zelnick is getting from Take Two are just a little too suspicious. There really doesn't seem to be ANY other reason for him to just refuse flat out. He's forgotten that he needs to look out for somebody other than himself. There's a whole lot of people who work for/own part of that company... and it sounds like he's more concerned with lining his own pockets than doing what's best.
Please, I ask one minute of silence to think of those poor Qa and Qa loc people who will lose their jobs if EA manages to buy Take2.
Hold on brothers, we're with you.
@Cchrist: I'm saying if you take your approach as it is now to this problem, then you're encouraging capitalism that will reach an excessive point where it harms the industry.
Seems that we are heading for the world of UT right now...
@NeoAkira:
No problem man. You are quite right in that if someone is into the shorter term investing, then just selling his shares would be quicker than taking legal action. It just went off in my head that he probably wants to continue holding onto the stock if he's taking it to the courts.