Not all activist targets are buys

Article Excerpt

The broad stock market drop this year has prompted activists to seek out companies perceived as particularly undervalued, such as the two we analyze below. However, their immediate prospects don’t inspire our confidence. TAKE-TWO INTERACTIVE SOFTWARE INC. $123 is a hold. The company (Nasdaq symbol TTWO; Consumer sector; Shares outstanding: 166.7 million; Market cap: $20.5 billion; No dividends paid; Takeover Target Rating: Medium; www.take2games.com) is one of the world’s largest independent video game publishers. Its major video game franchises include Grand Theft Auto, NBA 2K, and Borderlands. Hong Kong-based investment firm Segantii Capital Management is Take Two’s largest shareholder, with roughly 2% of the shares. Elliott Investment is also an investor. In May 2022, Take Two acquired Zynga Inc. for $9.5 billion. Zynga is a leading producer of mobile games such as Farmville, CSR Racing, Words With Friends, and Golf Rival. The purchase strengthened Take-Two’s mobile game offerings, the fastest growing segment of the interactive entertainment industry. The company now gets a third of its revenue from mobile…