The New York City Employees' Retirement Fund and the teachers' and firefighters' pension funds are suing Activision Blizzard, Inc. (ATVI) for underpricing the company shares as Activision Blizzard prepares to be taken over by Microsoft Corporation (MSFT).
The deal—which prices the maker of Call of Duty, World of Warcraft, Diablo, and other games at $95 per share—is believed to undervalue the company. Shareholders are now asking Activision Blizzard to disclose certain records under a legal provision called the 220 complaint, which entitles shareholders to examine certain company records and shareholder ledgers.
New York City officials claim that the initial proxy statement filed to report the sale omitted some material information such as Activision Blizzard's projections and sales process, which made the statement incomplete and misleading.
- Activision Blizzard faces fresh legal issues prior to its takeover by Microsoft.
- Critics see CEO Bobby Kotick as evading personal liability for workplace misconduct by executing a hasty merger.
- Activision Blizzard has been facing charges of workplace misconduct since last year.
- Shareholders also believe that the deal underprices Activision Blizzard shares.
Activision Blizzard has been under scrutiny since at least the summer of 2021 for allegations of workplace misconduct. Its Chief Executive Officer Bobby Kotick has been in the line of fire, as investigations suggested that he knew of the sexual misconduct in the company.
Critics see Kotick's hasty negotiations with Microsoft as his way of escaping personal liability. According to New York City officials, Kotick's involvement in the negotiation is itself questionable under the circumstances.
Other Charges of Workplace Misconduct and Insider Trading
In July 2021, based on findings by the Department of Fair Employment and Housing, California sued Activision for subjecting women to harassment and low pay. The agency found 10 violations of state employment law relating to discrimination against female employees in compensation, assignment, promotion, termination, constructive discharge, and retaliation. The complaint was filed in the Los Angeles Superior Court on July 20, 2021. According to the state agency, the company made no efforts to stop the discrimination and harassment.
In August, California extended its charges against Activision Blizzard after the Department of Fair Employment and Housing investigated the treatment of contract employees in the quality assurance and customer service departments. The company settled a federal harassment suit with the U.S. Equal Employment Opportunity Commission for discriminatory practices against female employees in March 2022.
An SEC investigation of options trades amounting to $60 million made by Barry Diller, Alexander von Furstenberg, and David Geffen in January, just before the merger with Microsoft was announced, is also underway.