Activision Blizzard shareholder suing over Microsoft sale

Activision Blizzard’s shareholder brought a suit against the board and publisher for alleged violations of Securities Exchange Act. The game publisher was proposing to sell its shares to Microsoft.

On Thursday, shareholder Kyle Watson filed the lawsuit. 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. SEC files, known as a 14A are required information before shareholders vote for an 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.

A Wall Street Journal report said that Kotick, and the company, are currently under investigation by the SEC. Bloomberg reports that the Federal Trade Commission is expected to review Microsoft’s purchase. Microsoft expects to conclude the transaction by 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.

[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.]