In a proposed class-action lawsuit, Activision Blizzard shareholders argue that they were “economically damaged” by company executives withholding information and allegations that have recently come to light through a California Department of Fair Employment and Housing (DFEH) discrimination and harassment lawsuit against the company.
The class-action complaint, filed in a California Federal Court by the Rosen law firm, specifically names Activision Blizzard CEO Bobby Kotick, current CFO Dennis Durkin, and former CFO Spencer Neumann. Those executives and others were “aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the Company,” according to the complaint.
To support that claim, the lawsuit cites multiple SEC filings Activision Blizzard made from mid-2016 onward. Those filings included boilerplate language regarding the risks to the business imposed by various legal matters. Activision Blizzard said that “such routine claims and lawsuits are not significant and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity,” the suit says.
That line and similar ones in the filings hide the fact that Activision Blizzard had fielded “numerous complaints about unlawful harassment, discrimination, and retaliation [that] were made to human resources (“HR”) personnel and executives which went unaddressed,” according to the complaint. The complaint goes on to suggest that “the pervasive culture of harassment, discrimination, and retaliation [at the company] would result in serious impairments to Activision Blizzard’s operations.”
The proposed suit says the company failed to tell shareholders that it was under investigation by the California DFEH or that it was “at greater risk of regulatory and legal scrutiny and enforcement” based on these undisclosed facts.
This all led to an Activision Blizzard share price that was “artificially inflated,” according to the complaint, resulting in shareholders overpaying based on faulty information. The shareholders are entitled to monetary damages based on that overpayment, the suit says. Activision Blizzard stock fell over 6 percent on July 27, the day after the lawsuit’s existence was publicly revealed. Since then, the stock has fallen an additional 5 percent, based on Tuesday’s closing price of $79.83.
This morning, Activision Blizzard announced that Blizzard President J. Allen Brack is stepping down after nearly 16 years with the company. That move comes after thousands of Activision Blizzard employees signed a petition decrying the company’s initial response to the California lawsuit and hundreds took part in a one-day “Walkout for Equality” last week while demanding action on numerous fronts.