I don’t want to sound like everyone’s grumpy uncle from Thanksgiving dinner, but I just don’t get Grand Theft Auto (GTA). To be fair, I am not a video game guy in any way, but a game based on a violent world of crime, which GTA apparently is, appeals even less to me than any other. Still, that is just my preference, and it doesn’t mean that I disapprove of the game or those who play it in any way. Nor does it mean that I won’t buy the stock of the publisher of the game, Take Two Interactive (TTWO), if a suitable opportunity presents itself. As of this morning, there is just such an opportunity.
As you can see from the chart above, TTWO dropped significantly after the market closed yesterday, hitting a low of 146.50, around 7% below yesterday’s closing price. It has bounced back a bit this morning but is still down, even though it seems the reason for the selloff yesterday was completely bogus.
What happened was that what appeared to be footage of the eagerly-awaited sixth installment of the franchise, or GTA VI, was leaked on X (formerly known as Twitter). Word quickly spread that it was not really high quality stuff, and that prompted Take Two’s subsidiary, Rockstar Games, to release the official trailer on YouTube earlier than they had planned. When that came out, it was obvious that the version leaked on X was indeed low quality, but that was not indicative of any quality issues in the game itself.
That should have meant that the whole thing turned out to be a tempest in a teapot, and that the stock should have bounced right back, but clearly that isn’t what has happened, at least not as of this writing. That raises the question of why TTWO is still trading around 4% below yesterday’s close, even though the “reason” for the drop yesterday turned out to be complete nonsense.
Ironically in some ways, that is probably because of the massive potential of the new version of the game, rather than the opposite.
GTA V launched in 2013 and did a billion dollars in sales within just a few days. It went on to become the second biggest-selling game in history, with 190 million copies sold, behind only Microsoft's (MSFT) Minecraft, with sales of 300 million copies. The expectation is for GTA VI to have a similar impact, or maybe do even better given the pent-up demand created by the ten year gap between releases.
That has led to a lot of people buying the stock in anticipation of the release, setting up a classic “buy the rumor, sell the fact” scenario that the disappointment in the leaked footage exaggerated massively. Those who bought with the intention of selling for a profit on a successful debut of the new version of the game were spooked when they saw what purported to be footage of the new game on X. Even if they didn’t see the footage, they may have been spooked by the sudden drop in the stock so close to the official release date. There was an understandable rush to exit the trade, but as it became clear that the whole thing was a non-story, much of the money stayed out and the stock is trading at a discount this morning.
None of this alters the fact that GTA VI is a huge release that will almost certainly result in a massive injection of cash for TTWO. If anything, the leak has ensured a lot of free publicity for the game, so the stock looks like a buy on a drop that is based largely on nothing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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