Shareholders Stick With Take-Two

Electronic Arts may have recently extended the deadline for its bid to acquire Take-Two, but the company's shareholders don't seem ready to go quietly. EA's offer price remains at $25.74 per share, while as of today, Take-Two has seen share value just over the $27 mark.

A peek at recent SEC filings reveals another item of interest: When EA made its most recent deadline extension, its third, it stated that 6,210,261 shares of Take-Two stock had been tendered to EA as of May 16th. That's only a small percentage of what EA would need to acquire a majority - but its even less than they used to have.

At the time of the second extension, as of April 17th 6,432,787 shares had been tendered - which seems to suggest that 222,526 shares have gone back to Take-Two. Granted, those 222,526 shares are statistically tiny in the grand scheme of things, but even a small loss of stake seems an inauspicious sign for a company making a hostile bid.

On the other side of the coin:

The rise-and-fall pattern of Take-Two's stock seems nonetheless to follow the movements of EA. It traded at only about $17 per share at the time EA announced its bid, and only began to climb thereafter. The stock has seen highs just ahead of each bid deadline, and began its ascent to its current high just after EA announced it had borrowed $1 billion to give it "options" in financing the possible acquisition. Wedbush Morgan analyst Michael Pachter has suggested previously that such stockholder patterns might indicate anticipation for the completion of a successful transaction.

The record-setting launch of GTA IV failed to have a noticeable impact on the share price, either, lending credence to the perspective that, failing an acquisition by EA, Take-Two's stock would lose a great deal of the value it gained on the possibility.

EA has stated publicly on numerous occasions that this latest extension will allow the FTC to continue reviewing the potential business combination, and EA has also said that the longer this fight drags out, the less likely it is they'll pursue it, no matter what the reason for delay is.

"The thing for us is that further delays... could affect the value of our offer," corporate development VP Owen Mahoney told Kotaku in April. That statement appears to be proven accurate, as the degree to which Take-Two's share price outvalues EA's offer continues to increase, while Take-Two continues planning ways to raise the less-concrete but nonetheless essential value of its owned IP - the announcement of a BioShock film, for example, certainly supports potential for sustained future growth for Take-Two.

So does this mean things look bad for EA's bid? Not necessarily.

Wedbush Morgan analyst Michael Pachter said that there are still many conditions to satisfy before a conclusion can be expected. Chief among these is the "poison pill" that Take-Two's management implemented. The board adopted a measure that says that anybody who buys more than 20 percent of the company's shares after April 7th is limited in the number of votes they get in the company. In other words, if EA won the company, they wouldn't be able to control it.

"Nobody will tender until all conditions are satisfied," Pachter told Kotaku. "The biggest is defeating the poison pill, so you should not expect the shares tendered to remain tendered. Those that were tendered subject to the closing condition

(which has NOT been met) are free to withdraw their tender and sell at a higher price in the open market."

Calling the back-and-forth shareholder trading continuing at present "pretty irrelevant," Pachter said he expects plenty of people to tender to EA once all the conditions up in the air are satisfied.

"At the conclusion of this process, it will end up as a friendly deal at a higher price," Pachter said.