Insider trading investigations and shareholder lawsuits threaten to hinder Microsofts Activision Blizzard acquisition

Microsoft’s acquisition of Activision Blizzard has been the subject of repeated legal attention.

According to The Wall Street Journal (opens in new tab) (via Eurogamer (opens in new tab)), the US Department of Justice and Securities and Exchange Commission – an agency intended to guard against market manipulation – are investigating three men over potential insider trading concerns.

On January 14 former 20th Century Fox president and CEO Barry Diller, Dreamworks co-founder David Geffen, and member of the German royal family Alexander von Furstenburg purchased a collective $100 million in Activision stock for $40 per share, notably less than its then-$63 price. Four days later, Microsoft announced its purchase of Activision Blizzard at $95 a share, more than doubling the men’s investment.

The SEC and DOJ are now investigating what the trio may have known of the acquisition in advance, and the extent to which they knew each other. The WSJ reports that Diller served alongside Activision CEO Bobby Kotick on Coca-Cola’s board for many years, and is said to be a long-term friend of Geffen. He is also von Furstenburg’s step-father, having married his mother in 2001. Diller claims that the purchase was “simply a lucky bet,” and that the trio “acted on no information of any kind from anyone.”

Elsewhere, several Activision Blizzard shareholders are suing the company and its board of directors over the proposed sale. The first lawsuit, filed in California earlier this month (via Polygon (opens in new tab)), alleged that the “unfair” acquisition served to help a board hoping to “procure for themselves […] significant and immediate benefits.” Five more shareholders have since come forward, echoing claims that the company’s filing with the SEC violates the Securities Exchange Act of 1934 – which helped establish the SEC itself – by being “misleading and incomplete.”

While at this point neither the investigation nor the lawsuits seem likely to entirely derail the purchase, they contribute to what’s a far less smooth process than either Activision or Microsoft would have been hoping for. The acquisition is already under extra scrutiny thanks to anti-trust concerns, and Activision Blizzard’s ongoing legal troubles over allegations of sexual harassment continue to be a concern. In recent days, another lawsuit has been brought against the company claiming workplace harassment contributed to an employee’s death.

The acquisition process is expected to end on or before June 30, 2023.

Activision’s flagship Call of Duty franchise is expected to remain available on PlayStation, even after its developers’ move to Xbox.

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