It’s fun to watch Take-Two (TTWO) spin its the story, first mentioned here on Sunday, about its golden-goose compensation proposals. The New York Times and the Wall Street Journal both had stories yesterday (here and here) on the plan, with spin, er, comments from the company.
My item did not include management comment because, as I stressed in the piece, it was commentary. It was derived exclusively from reading public filings — the same filings available to any investor, most of whom don’t have access to management to hear their side or spin of the story.
In my piece, I zeroed in on a clause in the proposed compensation deal that would allow options for the management company that runs Take-Two to vest immediately on a change of control if the acquiring company blabbed about it to the public before Take-Two’s upcoming annual meeting.
Considering the timing of the comp proposal — the day before Take-Two rejected the first of two takeover offers from Electronic Arts (ERTS) — it appeared the wording was aimed to head off any disclosure by EA, since automatic vesting would automatically make any deal more expensive.
However, according to the Wall Street Journal’s piece, Chairman Strauss Zelnick said it was done to protect shareholders from voting on the compensation increase without knowledge of a potential deal.
And that gets us to the moral of this story: Over the years I’ve learned that talking to management can provide great insight beyond public filings. Discussions with management, for stories, has worked for them and against them. I look for things beyond what they say, but also what they don’t say. How do they answer the question? Do they answer the question? Do they try to divert me? (My favorite: “You’re asking the wrong question.) Do they sound nervous? When I ask the question 10 different ways do they give the same answer or non-answer? The list goes on.
On the other hand, public filings should stand on their own. Any further explanation should be included in the filings rather than the usual gobbledygook of intentionally tightly knotted legalese that can take a ridiculous amount of time to unwind.
Funny thing here is that even the explanation requires unwinding.
The beat goes on…