A Delaware judge ruled on Thursday that former Activision Blizzard officials, including Chief Executive Bobby Kotick, must face most of a lawsuit from Microsoft. The lawsuit alleged that the firm’s officials shortchanged shareholders when Microsoft bought the Call of Duty game maker for $75.4 million.
Chancellor Kathaleen McCormick of the Delaware Chancery Court declared that shareholders in the proposed lawsuit can pursue their claim that Kotick and other Activision officials breached their fiduciary duties. The judge also dismissed two claims against Microsoft.
Judge finds sufficient allegations against Kotick’s sale process manipulation
Court documents revealed that shareholders, led by the Swedish pension fund Sjunde AP-Fonden, took legal action against Kotick for rushing into the merger so he could retain his job and $400 million in change-of-control benefits. The plaintiff also accused the tech executive of insulating himself from claims he was aware of widespread harassment at Activision.
The accusers claimed that the $ 95-per-share takeover price was too low from the beginning, and worsened as Activision’s performance improved during the 21-month regulatory approval process for the merger, which was finalized in October 2023. The federal judge stated in an 83-page document that there were sufficient allegations that Kotick manipulated the sale process to favor Microsoft. McCormick found that Kotick ensured speed and certainty during the sale.
The Delaware Chancery Court also found it reasonably conceivable that Activision officials put Kotick’s interest ahead of those of shareholders. McCormick highlighted that the officials allowed a lowball takeover price while concerns about harassment were lowering Activision’s stock.
The judge also dismissed allegations that Microsoft aided and abetted the alleged breaches, even though the tech company may have passively allowed the deal to continue while it occurred. McCormick also dismissed other claims against the Activision defendants.
Kotick faced intense scrutiny in 2021 during his tenure as CEO of Activision Blizzard, as the California Civil Rights Department launched investigations into the firm for potential workplace harassment and discrimination. The department and the video game company settled the case for $54 million by December 2023. According to court documents, both parties agreed that no court or independent investigation has substantiated any allegations of harassment at Activision, nor have the company’s senior executives tolerated such behavior.
Activision reports positive growth for Q3
Kotick’s tenure as CEO of Activision also faced two federal settlements related to purported workplace misconduct. Activision settled one $18 million agreement with the Employment Opportunity Commission, and one $35 million agreement with the Securities and Exchange Commission.
Activision Blizzard’s stock gained by 22.81% on Friday and is currently priced at $94.42, showing a significant year-to-date gain. The surge comes as the firm released its Q3 earnings report, showing that strong sales from key franchises and growth in their live services contributed to the momentum.
Activision reported earnings per share of $2.73 in the last quarter, which aligned closely with market expectations. The firm’s management also raised its guidance for the remainder of the year, enhancing market sentiment. Activision has disclosed plans to expand its reach in the esports sector, as its popular franchises, such as Call of Duty and World of Warcraft, have fueled its significant growth.
Microsoft also announced that it has reached proposed settlements in lawsuits pending in several U.S. states. The plaintiffs in the case alleged that the tech company had unlawfully employed anticompetitive means to maintain a monopoly in certain software markets. They also alleged that Microsoft ended up overcharging consumers who licensed its software for use in specific U.S. states for its operating system.
Microsoft denied the allegations and claimed it developed and sold its products at fair and reasonable prices. The firm confirmed that it has finalized settlements in California, New York, and Iowa; however, the programs in those states are still distributing benefits.
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Source: https://www.cryptopolitan.com/activision-officials-must-face-claims/
