Activision Blizzard is facing yet another lawsuit, this one filed by the New York City Employee Retirement System and pension funds representing the city’s fire department, police and teachers. The costume, available via axiosclaims that CEO Bobby Kotick was “unable to negotiate the sale of the company” to Microsoft and made the deal in part to “escape responsibility” for his role in enabling misconduct and abuse in the workplace.
The plaintiffs say the lawsuit arises from an October 2021 demand to inspect Activision Blizzard’s books and records as part of an investigation by its board of directors, specifically its “failure to maintain a safe and non-discriminatory work environment for its employees.” (specifically minorities and women). ) employees and failure to act in response to repeated and serious allegations of misconduct, discrimination and harassment by senior Activision executives.”
Activision partially complied, according to the complaint, but on January 18 – while the inspection was underway – the company announced the acquisition agreement with Microsoft. The plaintiffs say the settlement devalues Activision Blizzard – not just on the basis of the share price premium, which the lawsuit describes as “a paltry 1.16%”, but also because it also fails to take into account the value of the “derived claims”. of the plaintiffs. were developing separately against Activision Blizzard. These claims will disappear if and when Activision Blizzard becomes a subsidiary of Microsoft.
The settlement happened so quickly and at such a huge discount, the plaintiffs allege, because Activision Blizzard’s board members, and Kotick in particular, “faced a strong likelihood of liability for breaches of fiduciary duty” for failing to address the allegations. of misconduct in the company.
“No more,” the lawsuit states. “With the merger announced, Kotick will be able to entirely escape responsibility and accountability and will instead continue to serve as an executive after the merger closes. Worse, despite his potential liability for breaches of fiduciary duty, the Board allowed Kotick himself negotiated the transaction with Microsoft. The Board’s decision to entrust Kotick with the negotiation process is inexcusable for the additional reason that Kotick personally receives substantial material benefits whose value is not directly aligned with the price of the merger.”
The suit also references the March 2022 purchase of about $108 million worth of Activision shares by Alexander von Furstenburg, Barry Diller and David Geffen — all friends or associates of Kotick. This agreement triggered investigations into possible internal negotiation by the US Department of Justice and the Securities and Exchange Commission.
“These highly suspicious deals could deliver Kotick’s three affiliates a windfall of more than $100 million,” the lawsuit states. “Kotick’s continued suspicion of misconduct, even after the merger was agreed, further underscores the fact that Kotick was not able to negotiate the merger on behalf of the company.”
Hoeg Law attorney Richard Hoeg noted that the lawsuit is a “books and records request” related to the initial demand for records – his demands include access to the information requested in his original 2021 filing, as well as expenses and attorney fees incurred. for the lawsuit and “additional relief that the court deems fair and appropriate” – and while the language is pointed, Hoeg said it is unlikely to have any bearing on the acquisition, which was overwhelmingly approved by shareholders Last week.
It’s nothing, but compared to everything Activision (and Microsoft) are doing… it’s pretty close.May 4, 2022
“Okay, so this is a books and records request (not a more substantive action), it’s not filed by the city, but by funds that have an investment stake in Activision, and, to be blunt, 98% shareholder approval. really undermines the ‘value is too low/inadequately negotiated argument’,” tweeted Hoeg. “It’s nothing, but compared to everything Activision (and Microsoft) are doing… it’s pretty close.”
Still, obstacles remain. Microsoft’s acquisition of Activision Blizzard is subject to regulatory approvalwhich can be problematic and although some processes have been satothers continue to pile up: in March, an Activision Blizzard employee filed a lawsuit asking Removing Kotick as CEO because of their failure to solve the company’s problems.
In an email sent to PC Gamer, a representative for Activision Blizzard said the company will fight the complaint. “We disagree with the allegations made in this complaint and look forward to presenting our arguments to the Court,” said the representative.