AFSI - I had 600 shares. Sold 500 of them going into earnings because a big run up didn't happen. I figured that was a bad sign, so I sold most of my shares pre-earnings (although the stock had drifted fairly high once or twice this week). I did keep 100 shares, and the stock jumped after the earnings (good quarter). I could have sold the 100 shares for a $150 profit, but hung on for two hours (until after my accounting class) and the stock was dropping like a brick, so I sold for about a $60 profit. Overall, if I had watched the market closer, I could have easily cleared $300 on this stock. If I had had the guts to hold my full 600 shares through earnings (almost always a bad move from my experience) and sold before I left for class, I could have cleaned up with a $600-$900ish profit with no problem.
Coulda shoulda woulda. Sometimes you screw up, despite your best efforts (or perhaps, because of your best efforts...) Whatever the case, I did come out with a small overall profit ($100ish) on the AFSI trade.
TTWO - The ERTS buyout offer is still on the table awaiting government approval. TTWO has rejected the offer over and over, but as the stock is now treading at $2.00 below the buyout offer, I'm not sure what's going to happen here. The buyout offer will look a lot more tempting to many people. Also, TTWO has hinted that it's in talks with other companies about buying them out. ERTS has poor earnings showing today and is trading at a one year low. Does this indicate that the need TTWO even more? ...Anyway, I'm having trouble making the call here. Here are the scenarios:
1) FTC blocks the sale or alters it in some fashion (ERTS would have a virtual sports monopoly if they buy TTWO). It's hard for me to predict what effect this would have on the buyout. Would they have to spin off the sports games to another company before the sale could take place? ...the sports games aren't the big deal here anyway.
2) ERTS lets the bid expire and TTWO drops like a brick. ERTS comes back at later date and makes another offer.
3) ERTS ups the offer buy a dollar or two and sale goes through. ERTS has about 1.8 billion in cash (from memory) and an untapped loan potential of a billion or so (from memory).
4) Someone else offers to buy out TTWO. TTWO has hinted at they are talking with someone else. Microsoft is a rumor. MSFT already owns the Halo franchise, which made, what, $170 million (?) in a few days when the last game launched. TTWO owns Grand Theft Auto, which made roughly $500 million in a week. They're also making a GTA game for Nintendo DS, which should make a huge profit, perhaps even more than the $500 million on GTA:IV. If memory serves correct, there are about 10x the number of Nintendo DS's in the world than Xbox 360's and PS3's put together. If only a fraction of those people buy the DS GTA game, that will be one huge money maker. Even with a buyout, MSFT would still probably let the GTA games go multi-platform, but probably give the Xbox version extra content or a limited time advance release on the Xbox.
The MSFT buyout rumor is only a rumor. But TTWO has given hints that they are talking with "other interested parties". I bought 100 shares at $24.66, and am down $100 right now. The buyout offer from ERTS is standing at $25.75, and is set to expire in late August. The question here, is do I load the boat? Buy another 100 shares and price in? ...I don't like buying options...there's no guarantee that the deal will go through anytime soon...the buyout offer has already been extended 5 times.
Ok, I got off my lazy butt and dug up the MSFT article that I had read about the MSFT theory. The guy on Seeking Alpha wrote up a big blog on this topic:
"[MSFT's] Halo 3 generated sales of $170 million dollars during its first week last fall. (As previously discussed, virtually every component of creation, production, and distribution is internal; so much of this amount must fall straight to MSFT's bottom line). Compare that to a major blockbuster movie's debut weekend (the numbers are very similar), and the growing value of video games becomes clear.
However, that total, while impressive, is dwarfed by GTA IV's first week, as the game reported $500 million in sales.
For about $2.5 billion (25% over ERTS's bid, or about $32/share), MSFT could absorb that massive revenue- and profit-generating game along with the rest of TTWO's portfolio. TTWO does make other games; BioShock was a surprise success this year, and its sports franchises, covering basketball, baseball, hockey, and tennis, are ranked highly and sell well.
Microsoft could become a serious player in the video game industry if they made a console and sold the two best selling games on the planet. Making GTA exclusive to the Xbox (just like Halo is) would be a terrible decision, but providing some, incentive, like an earlier release date, could drive additional Xbox sales too.
Such a takeover would be insignificant to MSFT as a whole; unlike an overpriced Yahoo takeover, buying TTWO at $2.5b would only use up about 10% of their cash, in a transaction that's only as big as 1% of their market cap. However, their growing video game department would certainly flourish, growing to a point where it could be spun off if MSFT deemed that most profitable.
Microsoft has the cash, the takeover desire, and the rationale for making such a purchase. The Grand Theft Auto franchise alone is worth more than this current takeover price (which is why many people think that ERTS submitted the bid before the game came out, so that they could cap the share price), and TTWO has many other promising games and franchises that MSFT could continue to build and polish."
The only reason I give any credence to this guy's opinion is because, like I said, TTWO has acknowledged in a press release that they are talking with more than one "interested party". Only a few gaming companies have $2 billion to throw around. And ERTS's offer is a bit low. When one game can gross $500 million in a week, a $2 billion offer is low.
Some of you remember that I used to blog extensively about the TTWO/ERTS buyout, but I gave up because it was taking so long. Anyone have any opinions on this one? I'm tempted to load up. I'm willing to go long on TTWO if I have to, but I think that someone, ERTS, MSFT, etc, will try to snap up this company in the next year or two. And now that GTA is out, and they're making another GTA game or two...the company is only going to become more expensive the longer anyone waits.
Any opinions on how to play this one? Load the boat? Buy a few and wait it out, and a few puts to play it safe? hm....
---------------------------------------------------------------------------------------------------------
Now, for some fun stuff.
The Onion spoofs Al Gore. --quite funny. Also, here are a couple of those Will Ferrell video's, where he's imitating George Bush on his ranch. I love this one in particular. It was very popular a year or two ago so you might have already seen it. Also, here's Will Ferrell as George Bush talking about global warming - "Adam and Eve were naked, because the earth was hot, like it was meant to be" hehe. Speaking of global warming, did you know that Al Gore tries to make a little profit by paying himself for carbon credits? Now, I think Al is genuine in his urge to clean up the world's air, so I don't care if he makes a little cash while he's out there promoting environmentalism (among other things), but I'm surprised that the national media has never made a bigger deal out of this. Maybe it's because he's not in office? ...If he were in office, I get the feeling that this sort of info would be printed on the front page coast to coast and discussed on cable news non-stop, whether or not it held any real significance or not. Anyway...just some idle commentary there.
