An investor in the gaming giant Activision Blizzard has launched legal action against the corporation and its leadership, alleging violations of the Securities Exchange Act in relation to the firm’s impending acquisition by Microsoft.
The legal complaint, lodged by Kyle Watson, an investor of Activision Blizzard, was filed in a Californian court. Watson’s legal representatives have criticized Activision Blizzard’s proposed deal, as revealed in a recent Securities and Exchange Commission (SEC) document, as prejudicial for various reasons. They argue that it seems to ensure substantial immediate advantages for the board and executive team members.
The lawsuit voices unease regarding possible conflicts of interest, asserting that the acquisition deal does not align with the best interests of Activision Blizzard, Watson, or the broader community of stakeholders. It further points to the significant financial gain that would accrue to company officers and directors. The lawsuit references lucrative exit packages—referred to as “golden parachutes”—that may be granted to executives like CEO Bobby Kotick should they be dismissed. Essential disclosures needed before shareholder voting are contained within the SEC’s 14A filing.
Furthermore, Watson’s attorneys argue that the information Activision Blizzard disclosed on February 18 is “materially misleading and incomplete,” thereby breaching the Exchange Act. They pinpoint specific omissions in the filing, such as details pertaining to the “ad hoc committee” overseeing the sale and the lack of clear information on future employment scenarios post-acquisition, among others.
The complaint requests that the court mandate Activision Blizzard to issue a revised SEC preliminary proxy statement, rectifying any inaccuracies and ensuring full transparency. Should the sale proceed, Watson seeks “rescissory damages.”
In the planned takeover made public in January, Microsoft would acquire Activision Blizzard at a price of $95 per share, cumulating to a monumental $68.7 billion. This would earmark the deal as Microsoft’s most significant acquisition to date. Despite widespread scrutiny and criticism concerning his handling of pervasive issues of sexual harassment and gender discrimination within the company, CEO Bobby Kotick is poised to continue at the helm through this merger.
Per reports from the Wall Street Journal, there is already an ongoing SEC investigation into Kotick’s conduct and Activision Blizzard practices. Furthermore, Bloomberg earlier reported that the Federal Trade Commission (FTC) is expected to review Microsoft’s acquisition bid, with Microsoft planning to finalize the transaction by the end of June 2023.
In a separate lawsuit filed in August 2021, stakeholders of Activision Blizzard argued that the company’s market value has diminished due to the executive team’s gross mismanagement of sexual harassment and discrimination allegations.
Recently, the company also faced allegations of “union-busting,” concurrent with Activision Blizzard workers collaborating in a National Labor Relations Board (NLRB) hearing focusing on the establishment of a union for the Quality Assurance (QA) department.
