Today, Axios reported that Activision Blizzard is now being sued and investigated by New York City’s Employees’ Retirement System and pension funds for the city’s teachers, police and firefighters. The groups in New York City are suing Activision Blizzard because they own the company’s stocks and believe CEO Bobby Kotick, and other management, have failed their fiduciary duties, or essentially protect the value of the company. This suit, a 220 complaint, “allows stockholders to press companies to open their books and potentially expose wrongdoing.” Overall, the groups suing believe that due to Activision Blizzard’s “egregious” management, especially Kotick, the company’s value plummeted, forcing an inadequate and rushed deal with Microsoft.
In the lawsuit, the New York City groups are demanding an inspection into “Activison’s books as a basis to sue Kotick and board members for allegedly costing the company value.” If allowed, the groups would seek to find evidence about whether Kotick had known about the company’s work culture of sexual misconduct, documents related to the Microsoft deal, and information about the alleged four other buyers Activision Blizzard cited in the company’s official document about the Microsoft sale. This effort by the groups is in the hopes of proving that Kotick, and other management, had knowingly performed acts that financially hurt the company’s stock value, therefore they had created a hurried deal with Microsoft to escape consequences for any potential wrongdoings.
For perspective, Activision Blizzard was valued around $90-100 before the end of July, 2021, when the news broke that California would be suing Activision Blizzard over sexual harassment allegations. After the California lawsuit was announced, Activision Blizzard’s stock value lowered to the $70-80 range until November, when the Wall Street Journal reported that Kotick allegedly was aware and actively tried to minimize the reports of sexual harassment. With this shocking news, Activision Blizzard’s value plummeted even more to the $55-60 range. However, once the news broke on Jan. 14, that Microsoft had acquired Activision Blizzard, the company’s value drastically rose from $65 to $82 and now resides at a steady $78-81 valuation.
While Microsoft had purchased Activision Blizzard for an astonishing $68.7 billion, with major shareholders approving of this deal; however, this is because Microsoft had bought the company at $95 per share when valued at $65. Here, the groups from New York City are arguing that if Activision Blizzard’s hadn’t nosedived its value by about 40%, due to extremely poor management, stockholders of Activision Blizzard would had made considerably more money if Microsoft was buying the company at its value before the misconduct allegations. Furthermore, it does not help that three associates of Kotick are under investigation for insider trading by the SEC and US Department of Justice. Barry Diller, David Geffen, and Alexander von Furstenberg had purchased 4.12 million Activision Blizzard shares four days before the announcement of the Microsoft acquisition, for a profit of around $108 million.
In totality, this marks yet another lawsuit aimed at the alleged misconduct within Activision Blizzard. As of right now, Activision Blizzard is facing 19 lawsuits and investigations, including this New York City 220 complaint, and questions arise if Kotick or others will face any consequences. For the New York City groups suing, they hope to uncover if Kotick and other management are trying to abandon ship, after wrecking the value of Activision Blizzard, and dodge any legal consequences for their potential violations through the Microsoft acquisition.