New York City officials are accusing Activision Blizzard Chief Executive Officer Bobby Kotick of trying to sell the company to Microsoft in a hurry in order to avoid any liability for wrongdoing and make significant bonuses to boot.
The New York City Employees’ Retirement System and pension funds for the city’s firefighters, police force, and teachers filed the lawsuit on April 26, Axios reported.
All of the plaintiffs own Activision Blizzard stock. They filed the lawsuit in hopes of gaining access to the company’s corporate books and records, which they believe could uncover misconduct by Kotick and the board of directors that they say is responsible for the depressed share price.
The plaintiffs originally sought access to the documents in October of 2021 after Activision was sued by the California Department of Fair Employment and Housing (DFEH) over its failure to handle allegations of sexual harassment and discrimination against female employees. They wished to know what Kotick and the board knew about the misconduct and whether there were grounds to sue for allegedly devaluing the company.
Just three days after the publication of a Wall Street Journal report alleging the company’s leaders had known of sexual misconduct allegations for years, Microsoft began talks with Kotick about a deal to buy Activision.
However, at the time, a company spokesperson said Kotick would not have been informed of every report of misconduct at the company, nor could he reasonably be expected to be knowledgeable about every personnel issue.
The lawsuit alleges: “Given Kotick’s personal responsibility and liability for Activision’s broken workplace, it should have been clear to the Board that he was unfit to negotiate a sale of the Company. But it wasn’t.”
Rather, it seems the board let Kotick lead negotiations on behalf of the company.
The lawsuit continues: “…without Board authorization or an actual offer from Microsoft, Kotick blithely informed Microsoft that he would be willing to accept an offer in the range of $90-$105 per share.”
In January, it was announced that Microsoft had agreed to the acquisition of Activision Blizzard at $95 per share, in an all-cash transaction valued at $68.7 billion.
According to the lawsuit, it is no wonder Kotick moved with such speed to execute an agreement, as the acquisition would allow Kotick and his fellow board members to escape liability for devaluing the company, and it would offer Kotick the opportunity to “realize substantial non-ratable benefits,” among which were “significant bonuses that Kotick could receive for simply ensuring that Activision complied with the law.”
In the lawsuit, the plaintiffs say the merger price “appears to seriously undervalue Activision as it represents a mere 1% premium” over the company’s stock price before the lawsuit brought by the California DFEH in July 2021.