Activision Blizzard shareholder suing over Microsoft sale

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An Activision Blizzard shareholder filed a lawsuit against the game publisher and its board of directors over alleged Securities Exchange Act violations in its proposed plan for its sale to Microsoft.

The lawsuit, filed by shareholder Kyle Watson, was filed in California on Thursday. Watson’s lawyers called Activision Blizzard’s plan for the sale, outlined in a recent Securities and Exchange Commission (SEC) proposal, “unfair for a number of reasons” — one of which, lawyers said, is that the board is looking to “procure for themselves and senior management […] significant and immediate benefits.”

The lawsuit calls into question potential conflicts of interest, specifically that the deal “is not in the best interest” of Activision Blizzard, Watson, nor company stockholders, and “will produce lucrative benefits for the [Activision Blizzard’s] officers and directors.” It also referenced the “golden parachute” that some executives, like CEO Bobby Kotick, would receive should he be fired. The SEC filing, called a 14A, includes information necessary before shareholders vote in agreement.

Elsewhere in the filing, Watson’s lawyers allege that Activision Blizzard’s Feb. 18 SEC filing is “materially misleading and incomplete,” violating the Exchange Act. It calls out missing information in the SEC filing relating to the “ad hoc committee” that ran the sales process, as well as information about “post-transaction employment” and other relevant data.

Watson is looking for the court to order Activision Blizzard to release a new SEC preliminary proxy statement that includes more facts and no “untrue statements.” Should the proposed transaction go through, Watson is looking for “rescissory damages.”

As part of the proposed transaction, announced in January, Microsoft is slated to buy Activision Blizzard for $95 per share, for a total cost of $68.7 billion, the largest acquisition in Microsoft’s history. Activision Blizzard CEO Bobby Kotick continues to lead the company through the merger, despite calls for his resignation over his involvement in Activision Blizzard’s sexual harassment and gender discrimination allegations.

Kotick and the company are already under investigation with the SEC, according to a Wall Street Journal report. The Microsoft acquisition is also expected to be reviewed by the Federal Trade Commission, Bloomberg reported earlier this month. Microsoft intends to close this deal by the end of June 2023.

Activision Blizzard shareholders are also suing the company, in a separate case filed in August 2021, alleging that corporate leaders’ negligence in its sexual harassment and discrimination reports caused the company’s shares to lose value.

The company has also been accused of “union-busting” in recent weeks, as the company and workers testify in a National Labor Relations Board (NLRB) hearing to define a union for QA workers.

updated: An Activision Blizzard spokesperson provided the following comment to Polygon: “We disagree with the allegations made in this complaint and look forward to presenting our arguments to the Court.”

Update (Feb 25): A second shareholder lawsuit has been filed against Activision Blizzard and its board of directors, this time in a New York court. The plaintiff, Shiva Stein, is bringing similar complaints to the court: Specifically, that Activision Blizzard’s proxy disclosures aren’t good enough.

Of note regarding Stein, however, is that she’s reportedly one of the most “prolific” securities plaintiffs in the United States — second only to the Securities and Exchange Commission itself, according to Reuters. Legal data company Lex Machina reported in 2021 that Stein filed 124 securities lawsuits from 2018 and 2020. Half of the lawsuits she’s filed in 2021 have since been dismissed voluntarily, Reuters said. Stein’s lawyer told Reuters it was because the “defendant corporations made corrective disclosures that more fully informed public shareholders.”

[Disclosure: Casey Wasserman is on the board of directors for Activision Blizzard as well as the board of directors of Vox Media, Polygon’s parent company.]

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