Take-Two Interactive Software reached a $3 million settlement agreement with the U.S. Securities and Exchange Commission, relating to charges that the game publisher engaged in falsifying financial records as part of a scheme, the SEC announced Wednesday.
A settlement agreement had largely been expected, after Take-Two announced two years ago that it had received a notice from the SEC's staff that it would recommend that charges be filed against the company. Take-Two, at the time, said the company expected to pursue a settlement agreement, rather than fight regulators in court.
Take-Two agreed to the settlement without admitting to or denying the SEC's allegations, the SEC said. The agreement is also subject to approval by the U.S. District Court for the Southern District of New York.
The case centered on allegations that Take-Two backdated stock options for its officers, directors, and key employees that could be exercised at a strike price lower than where the stock was trading on the date the options were granted. The SEC alleged that Take-Two defrauded investors by failing to properly record the stock option compensation grant date and strike price.
Take-Two is just one of a number of companies over the past several years to pay multimillion-dollar settlements to the SEC in connection with stock option-backdating cases. , which also later affected , Apple Computer, and CNET News' former publisher, CNET Networks.
Video game publisher Take-Two Interactive Software posted a wider quarterly loss on Wednesday and forecast a sharp drop in sales revenue for the current quarter.
For the quarter that ended October 31, the company best known for its Grand Theft Auto franchise reported a net loss of $15 million, or 20 cents a share, compared with a net loss of $7.1 million, or 10 cents a share, a year ago. Revenue increased 11 percent to $323.4 million on the sales strength of its Midnight Club: Los Angeles, NBA 2K9, and Grand Theft Auto IV titles.
The company predicted a fiscal first-quarter loss of 70 cents to 85 cents a share on revenue of $175 million to $225 million, falling short of Wall Street estimates of $310.75 million.
Executives blamed weak consumer spending amid a global economic downturn. Take-Two Chairman Strauss Zelnick said the company had "witnessed significant softness" in retail sales and noted the 2009 forecast factors in the recent bankruptcy of electronics retailer Circuit City.
Take-Two fended off a $2 billion hostile acquisition bid earlier this year by rival game publisher Electronic Arts.
Shares of Take-Two fell to $9.56 in after-hours trading.
Electronic Arts has abandoned its $2 billion bid to acquire rival game maker Take-Two Interactive Software, ending a seven-month takeover effort that turned hostile before the two companies entered private talks last month.
"After careful consideration, including a management presentation and review of other due diligence materials provided by Take-Two Interactive Software, EA has decided not to make a proposal to acquire Take-Two and has terminated discussions with Take-Two," EA said in a statement Sunday.
The announcement brings to a close EA's long-running, but oft-rebuffed, effort to acquire Take-Two.
EA took its buyout offer public for the publisher of the wildly popular Grand Theft Auto franchise in February at $26 a share after Take-Two spurned an earlier attempt at a friendly takeover at $25 a share. Take-Two rejected the $26 offer as too low, and EA launched its hostile bid in March. EA subsequently reduced the offer to $25.74 a share. But repeated extensions and offer revisions seemed to hurt the company's credibility.
EA dropped its hostile bid in August after the two companies agreed to hold private talks about a potential transaction. A few days later, the Federal Trade Commission said it had conducted an investigation of a merger of the companies, but said no further action was required and closed the investigation.
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