Analyst Calls for Ouster of Video Game Firm’s Chairman

In an unusual move for a brokerage firm, a Banc of America Securities analyst on Tuesday called for the ouster of Take-Two Interactive Software Inc. Chairman Ryan Brant, citing the video game publisher’s accounting troubles and Brant’s pattern of personal stock sales.

BofA analyst Gary Cooper also said Take-Two should replace director and audit committee member Oliver Grace, one of the company’s largest shareholders through his position as a partner at Anglo American Security Fund.

Take-Two publishes the “Grand Theft Auto,” “Mafia” and “Max Payne” video game series, among others. The company’s shares rocketed as high as $41 in October on optimism about 2003 game sales.

But the stock has since plunged. In December, the company, Brant, another employee and two former officers received so-called Wells notices from the Securities and Exchange Commission, indicating that they might face civil action over accounting issues the SEC has been investigating for two years.

In the last week, New York-based Take-Two has warned that it would restate nearly five years of financial results, and that its fiscal first-quarter profit would be about one-third less than expected in part because of weak holiday game sales.

Take-Two shares fell 88 cents to $28.85 on Nasdaq on Tuesday, and are down 15% since Jan. 23.

Cooper, based in San Francisco, told clients that “the one constant through Take-Two’s years of accounting irregularities, SEC investigations, and dubious operating decisions ... has been Chairman Ryan Brant.

“Increasingly, given the uneven performance of the business and the continuing legal and accounting struggles, we believe Take-Two’s board of directors should seek new leadership at the highest level, the chairman,” Cooper said.

It has been rare for brokerage analysts to recommend selling stocks of companies they cover, and rarer still for them to call for the ouster of senior executives.

Cooper did not return a phone call for comment. A Take-Two spokesman said the company had no comment.

In his report, Cooper said Brant had sold 350,000 personal shares of Take-Two stock between Jan. 7 and Dec. 2 of last year, in 16 different sales.

Director Grace, Cooper said, sold shares in both the fiscal third and fourth quarters of 2003.

“It does not seem appropriate to us that one of the largest shareholders, who represents the audit committee, would be able to sell a significant amount of shares at a time when the accounting for the business was not accurate,” Cooper said.

But the company last week said the accounting issues, which center on whether revenue may have been recorded prematurely, would result in only small changes to earnings for the last two years.

Despite the first-quarter earnings shortfall, Take-Two said it expected to earn $2.45 a share for the full year on revenue of about $1.2 billion.

Cooper, citing accounting worries and his concerns about management, said the stock warranted a “neutral” rating despite its relatively low price-to-earnings ratio.