4 Attachment(s)
Activision Blizzard Shareholders Encouraged to Sue After Destiny Debacle
In the wake of the highly-publicized split between Bungie and Activision Blizzard, some investors and shareholders were less than happy with the fact that losing Destiny made Activision's share price take a hit. Shortly after the split, two class action lawsuits were announced on the basis that Activision had misled its investors as to the nature and possibility of Bungie's departure.
Now, it looks like a lead plaintiff is being sought for one of the class actions, but will it succeed? We take a look at the current legal state of play with the latest pending Activision Blizzard lawsuit, and where the company might go from here.
ACTIVISION BLIZZARD LAWSUIT: THE STATE OF PLAY
Right now, it appears that the public is aware of six confirmed class action suits being brought against Activision Blizzard. From seeing samples of the complaints from Rosen Law Firm, The Schall Law Firm, and Pomerantz LLP, some common threads between the suits are clearly identifiable. At the time of writing, it looks like all six suits are still active according to the websites of the various firms.
However, the one that we're most concerned with in the meantime is the suit by Pomerantz LLP. It's now been reported by GamesIndustry.Biz that Kuznicki Law is drumming up shareholders to submit losses for Pomerantz's claim that was made earlier in the year. In particular, Pomerantz LLP's complaint centers around the following:
[
Quote:
...] that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the termination of Activision Blizzard and Bungie’s partnership, giving Bungie full publishing rights and responsibilities for the Destiny franchise, was imminent; (ii) the termination of the two companies’ relationship would foreseeably have a significant negative impact on Activision Blizzard’s revenues; and (iii) as a result, Activision Blizzard’s public statements were materially false and misleading at all relevant times. — Pomerantz LLP
As mentioned, this complaint is unsurprisingly similar to the suits filed by the other firms, with the crux of the complaints originating from Rosen Law Firm and The Schall Law Firm being that:
- Activision Blizzard kept shareholders and investors in the dark about the fact that the partnership with Bungie was going to be terminated;
- Activision Blizzard either withheld or made materially false statements regarding the impact that Destiny's sale as part of the termination would have on company revenue; and
- As a consequence of Activision Blizzard keeping its investors in the dark, they suffered damages when the real impact of the split played out.
ACTIVISION BLIZZARD LAWSUIT: MUCH ADO ABOUT BEING MISLEADING
The buzzword here in all the suits is the term "misleading". However, what does that actually mean for what's really at stake here? When examining these lawsuits, it's usually quite helpful to assess what exactly the complainants are wanting out of this. Here, the claim from Pomerantz LLP notes that the class' basis for recovering damages is going to be the Securities Exchange Act of 1934.
This particular piece of legislation and that provision in particular is concerned with curbing manipulative practices in the course of securities trading. The layman's term for that is usually "fraud", which isn't an unfamiliar term to associate with Activision Blizzard in 2019; the company was reportedly under investigation for securities fraud earlier in the year. When the lawsuits refer to conduct on the part of Activision Blizzard being misleading or materially wrong, the inference from that on top of the damages being claimed is that the company's conduct amounts to fraud in securities trading.
ACTIVISION BLIZZARD LAWSUIT: SEASON OF THE SEC
For the sake of clarity, Rule 10(b) of the Securities Exchange Act is specifically mentioned in Pomerantz's complaint. The provisions that comprise 10(b) are pretty standard when it comes to legislation designed with the protection of commercial interests in mind. It's a bit of a common sense laundry list: thou shalt tell investors things, thou shalt not engage in an act that would be considered fraud, and thou shalt not make untrue statements regarding the purchase or sale of a security.
10(b) of the SEA also means that it's illegal to be deceptive when dealing with the purchase or sale of securities in a way that would be contrary to the SEC's rules on protection of investors. In the past, courts in the United States of America have ruled that private parties can sue under Section 10(b)-5, which is a specific provision that imputes liability for failure to disclose material facts that investors would consider crucial when considering whether or not to buy or sell a security.
Section 10(b)-5 is specifically highlighted in Pomerantz LLP's complaint, which is as good an indication as any that it's where they plan to hook Blizzard Activision. It's also worth noting that their complaint specifically mentions that the class intends to pursue remedies not only against Blizzard Activision but also against its top officials.
ACTIVISION BLIZZARD LAWSUIT: HOW COULD THIS PAN OUT?
From the number of class actions being brought against Blizzard Activision, it's possible that scorned investors and shareholders can smell blood in the water in the wake of Bungie's departure. That being said, the large majority of these suits are still seeking a lead plaintiff i.e. someone to essentially put in the hard yards for the other affected members of the class and to be more involved in things like litigation strategy.
While these suits have been filed, they're still missing the essential human component to them to take the matter further. That's likely why Kuznicki Law is putting out the call to arms. However, just because a suit has been filed doesn't necessarily mean that it'll get all the way through a protracted trial even if a lead plaintiff is found.
Settlements are often the way that a lot of class action suits go. While the investors and shareholders from Blizzard Activision may well be more moneyed than the average Joe, these suits can become an exercise in incinerating money quicker than you think, especially if there's any uncertainty about the extent of the damages that the class could potentially claim from the company; whatever they get is going to have to be divvied up in the end.
Remembering that Activision Blizzard's CEO, Bobby Kotick, made a list of the Most Overpaid executive officers in the United States means that those sweet millions of his could be part of the honeypot too. This could definitely be a consideration for the class when it comes to settlement offers.
Whether any directors or authorized persons in the company could actually be left personally on the hook for this alleged potential SEC violation remains to be seen, but it will be up to Activision Blizzard and any other named parties that the class seeks remedies from to refute these claims.
Ultimately, it's anyone's game when it comes to a class action suit, and we don't have enough information on deck about the content of claims to make a definite judgment. One thing's quite clear though — a long trial could jeopardize Activision Blizzard's commercial standing even further in the wake of its already-falling stock prices, so these lawsuits could signify series of gambles that the company potentially can't afford to make.
