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Shares of video gamer Take-Two Interactive (NASDAQ:TTWO) got smoked on Tuesday following a report that the firm had been subpoenaed by a New York grand jury investigating hidden sex scenes in its flagship game "Grand Theft Auto."

GTA

A relatively "tame" scene from Grand Theft Auto, San Andreas Faultline

Down 16% to $10.85, Take Two is about 2 points away from our aggressive $8 price target, which we placed on the firm back on January 30th. At that time, Take Two was trading north of $16 per share. In that report, we argued that Take-Two was spoiled goods and void of credibility. True post-modernists, we quote ourselves: "Potentially cannibalized/sluggish sales, further management erosion, and a staid gaming environment all spell one thing for Take Two: a mess bloodier than its games."

Yup, we got that one right. Since we first lambasted TTWO on January 11th (private memo to clients), shares have fallen a total of 50%.

Citigroup dropped its price target on the stock to $9 from $12 on Tuesday, but we think they're still too optimistic: legal fees, eroding profits, and revolving door managerial exits will continue to hammer shares over the next quarter, we think.

The only thing going for Take Two at this point in time is a possible takeover bid. The company still holds some valuable gaming titles and the arrival of Sony's (NYSE:SNE) new console could serve as a short term catalyst, although we wouldn't bet on it. There is definitely the possibility that one day we will wake up and Take Two will be a small division of a much larger player.

Today, though, that's a poor excuse for buying into this tall order of risk. Jump in Take Two's waters today and we guarantee you'll be spending your July 4th in a decrepit bar crying in your beer, talking to the wall, and wondering why your wife won't take your beligerent phone calls.

TTWO 1-yr chart:

TTWO 1-yr chart

Source: Take-Two Interactive Discovers the Downside to Placing Secret Sex Scenes in a Video Game (TTWO)