TTWO shares drop on earnings warning, stock option investigation
Take Two just warned Wall Street analysts that their estimates for Take Two earnings in upcoming quarters are "too high," and disclosed new subpoenas from the NYC district attorney's office for documents related to stock options grants. Company shares dropped over 8% to $11.20 in after-hours trading.
Some gamers might be tempted to shrug off all this bad news and what it's done to Take Two's shares, figuring that what happens on Wall Street doesn't matter so long as Take Two delivers the goods next October with Grand Theft Auto IV.
But Take Two's financial woes do matter because the company uses its stock as compensation. When the company's shares drop, employees take a de facto pay cut, making it more difficult for the company to motivate and retain the brains that create hit titles. In the software and creative industries, it's said that 100% of company value walks out of the door every evening. If this keeps up, Take Two's going to have a harder time convincing employees to return the next morning.
[Disclosure: I own way too many shares of Take Two. My wife reminds me of this almost daily.]
