Take-Two Interactive Software Inc. (TTWO), maker of the “Grand Theft Auto” video games, fell the most since June after the company bought back a $203.5 million stake from Carl Icahn, marking an end to his involvement.
Take-Two slid 5.4 percent to $16.01 at the close in New York, the biggest decline since June 12. Shares of the New York-based company have gained 45 percent this year.
Icahn, an activist investor, shook up Take-Two’s board almost four years ago after acquiring about 11 percent of the company. At the time, he was betting in part that Take-Two might be acquired, a person familiar with his thinking said then. While that never happened, the investment was profitable for the 77-year-old billionaire.
“His exit may signal that he doesn’t believe a sale of the company is likely,” Michael Pachter, an analyst with Wedbush Securities in Los Angeles who recommends the shares, said today in a research note.
With the sale, Icahn almost doubled his investment. Take-Two repurchased 12 million shares at yesterday’s closing price of $16.93, according to a statement today. Three Icahn-backed directors of Take-Two, Brett Icahn, Jim Nelson and SungHwan Cho, stepped down from the board.
Icahn has owned Take-Two shares since at least August 2006, when he reported a 1.1 percent stake. The stock was trading about $8 when he increased his holding to 11 percent in December 2009. He forged an agreement for three board seats a month later, a deal that required his directors to step down if he cut his stake to less than 5 percent.
“It’s sort of insane that you wouldn’t talk to all of your shareholders,” Strauss Zelnick, Take-Two’s chairman and chief executive officer, said today on Bloomberg Television. “Generally people who control big pools of capital, it didn’t drop into their laps. Carl shares ideas.”
Icahn has had hits and misses in entertainment. In October, he sold some of his holdings in Netflix Inc. for a profit of about $800 million in about year. He never acquired board seats.
Two years ago, Icahn sold 19.2 million shares of Lions Gate Entertainment Corp., the independent film and TV studio, for $7 each after trying unsuccessfully to buy the company.
The shares have more than quadrupled since, closing yesterday at $30.23, on the strength of films including “The Hunger Games” and the “Twilight” series.
Icahn led a 2005 proxy fight that put him on the board of the video rental chain Blockbuster as the largest shareholder, when the stock was worth about $10. He resigned five years later and in March 2010 sold most of his stock.
Blockbuster went into bankruptcy in September 2010 and was sold to Dish Network Corp., which has closed its stores.
Spurred by sales of “Grand Theft Auto V,” Take-Two’s profit excluding some items soared to $325.6 million, or $2.49 a share, in the latest quarter from $10.2 million, or 11 cents, a year earlier, the company said in October.
“This share repurchase reflects our confidence in the company’s outlook for record results in fiscal 2014,” Zelnick said in today’s statement. The company has more 10 titles in development, he said on Bloomberg TV.
At the time of the 2010 board deal, Cho, Nelson and Brett Icahn, Carl’s son, were put forth as directors. Icahn has used a similar strategy at other companies to boost stock prices. Nuance Communications Inc., which makes speech-recognition software, named two Icahn directors to its board in October.
LionTree Advisors and Willkie Farr & Gallagher LLP served as Take-Two’s advisers on the transaction. The buyback was made outside the company’s stock repurchase program, which authorized them to buy back 7.5 million shares.
“Grand Theft Auto V” came out on Sept. 17 and recorded the biggest three-day sales debut of any video game in history, Take-Two said. In the quarter, the company shipped about 29 million copies of the game, a fantasy of thug life in Southern California.
“The timing for ‘GTA V’ was excellent,” Zelnick said in October. “We saw huge demand and really no other alternatives.”