Analyst: GTA unlikely to affect EA/Take Two saga

EA isn’t likely to alter its bid for Take Two in the wake of GTA’s exceptional first week of sales – and Take Two shareholders wouldn’t expect them to.

That’s according to industry analyst Michael PAchter, who has told MCV that EA CEO John Riccitiello is a very savvy and capable manager, and his $25.74 offer fully incorporates his expectations for the success of GTA”.

Since EA’s initial bid on February 25th – when the firm’s stock closed at $47.14-per-share – its value has grown by over 10 per cent.

On the other hand, Take Two’s stock closed at $26.89-per share that day – and has since dipped by three per cent.

Pachter told MCV:
Take-Two stock has traded pretty consistently around the EA offer price since February 25, when EA’s intentions were made public.

The stock hasn’t really budged since the release of GTA, suggesting to me that Take-Two shareholders have fully factored in the future profits from the game, and further suggesting that they are unlikely to be moved by reports of first day or first week sales.

As a practical matter, the stock is in the hands of risk arbitrageurs, and the share price reflects the risk-weighted probability of EA’s offer going higher or of the company walking away from the deal altogether.

I suppose that first day or first week sales figures could translate into "deal lust" from EA, prompting the company to make a higher offer, as Mr. Zelnick has suggested, but my view of John Riccitiello is that he is a very savvy and capable manager, and his $25.74 offer fully incorporates his expectations for the success of GTA.

It appears to me that EA will raise its offer only if it feels that it must do so to satisfy the arbs, not as a result of early sales figures for GTA.”

Pachter’s comments come after Take Two executive chairman Strauss Zelnick said that GTA’s early success ‘vindicated’ his decision to turn down EA’s initial $2 billion offer.