Investor alleges negligent leadership has damaged the publisher’s share price
An Activision Blizzard shareholder on Tuesday filed a lawsuit against the video games publisher, roiled over the past two weeks by a state investigation into alleged workplace harassment. The suit, which seeks class action status, says the negligent oversight of chief executive Bobby Kotick and other corporate leaders caused the company’s share price to lose substantial value.
California’s Department of Fair Employment and Housing announced July 22 that it had filed suit against Activision Blizzard over a years-long pattern of workplace discrimination, harassment, and “frat boy” culture to which female employees were subjected.
In the 11 days since, statements from Kotick and corporate leadership have done little to help the company’s image. On July 26, 800 employees wrote a public letter to Activision Blizzard’s officers, calling their response to the California suit “abhorrent and insulting.” That referenced the initial reaction from Fran Townsend, the company’s chief compliance officer, who called the state’s complaint “truly meritless and irresponsible” in an internal memo.
On July 27, thousands of employees signed an open letter supporting the California DFEH action against their company, and followed that by walking off the job in protest on July 28. Activision Blizzard’s share price lost $6.09 (about 6.7%) on July 27, the same day Kotick released a letter to employees that apologized for the company’s “tone deaf” response to the crisis.
Since July 27, Activision Blizzard’s share price has slid even further, trading at $78.90 as of publication time, another 6% drop on top of the July 27 losses.
The plaintiff in the shareholder lawsuit is Gary Cheng, who bought Activision Blizzard stock sometime in the past five years. Cheng is represented by The Rosen Law Firm of Los Angeles, a company that touts itself as the best in the United States for “Number of Securities Class Action Settlements.”
The complaint, filed in federal court for the Central District of California, alleges that Activision Blizzard’s routine, unaudited quarterly filings — statements that declare potential risks that could affect the company’s share price — contained statements that are now “materially false” in light of the California DFEH lawsuit.
The complaint references Kotick’s July 27 statement and the employees’ July 28 walkout. “As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiff and other Class members have suffered significant losses and damages,” reads the lawsuit. The other defendants named are Dennis Durkin, Activision Blizzard’s chief financial officer, and Spencer Neumann, the company’s CFO from May 2017 to January 2019.
Activision Blizzard has a quarterly earnings conference call with investors scheduled for 4:30 p.m. EDT on Tuesday. Also on Tuesday, J. Allen Brack, the president of Blizzard Entertainment, announced he had stepped down from his position, leaving studio executives Jen Oneal and Mike Ybarra to lead that part of the company.