May 4, 2022 - Technology

New York City sues Activision, targeting CEO Bobby Kotick

CEO Bobby Kotick walking down a sidewalk

Bobby Kotick in 2019. Photo: Patrick T. Fallon/Bloomberg via Getty Images

Activision CEO Bobby Kotick rushed to secure a takeover bid from Microsoft to escape liability for misconduct at the company, a new lawsuit from New York City officials alleges.

Driving the news: The suit was filed in Delaware on April 26 by New York City Employees’ Retirement System and pension funds for the city’s teachers, police and firefighters. The groups own Activision stock and believe actions by the gaming giant's management hurt the company’s value.

  • The office of NYC’s comptroller shared a public version of the suit with Axios on May 3.

The details: The lawsuit is an action in Delaware’s Court of Chancery (technically a “220 complaint”) that allows stockholders to press companies to open their books and potentially expose wrongdoing.

  • New York City is demanding Activision provide a long list of documents, including material related to the Microsoft deal, info on five possible buyers cited in Activision’s official description of the sale talks, board memos and more.
  • The city has been pressing Activision for internal documents since the fall, originally to find out what CEO Bobby Kotick knew of sexual misconduct at the company. (That misconduct had been the subject of lawsuits and news reports since the summer.)
  • As laid out in the complaint, New York sought access to Activison’s books as a basis to sue Kotick and board members for allegedly costing the company value. It expresses frustration that Kotick, already under fire, headed up rapid negotiations in late 2021 to sell the company to Microsoft.

What they’re saying: “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,” the suit says. “But it wasn’t.”

  • New York says the Microsoft deal, which is pending regulator approval, allows “Kotick and his fellow directors a means to escape liability for their egregious breaches of fiduciary duty.”
  • It also says Microsoft’s $95/share offer undervalues the company, which was trading at close to that before Activision’s public scandals began last summer.

A November investigation by the Wall Street Journal stated that Kotick knew of misconduct at the company, though an Activision spokesperson said he would not have been aware of all employee complaints.

  • Kotick told the WSJ at the time that he was “committed to making sure we have the most welcoming, most inclusive workplace in the industry.”
  • An Activision rep declined to address the claims in the suit.

The big picture: Activision has been facing an avalanche of lawsuits and investigations since last summer, as tallied in the company’s latest quarterly filing, issued yesterday:

  • 1 federal harassment suit (settled, though facing appeals)
  • 1 discrimination suit from California
  • 1 purported class action suit
  • 4 shareholder lawsuits (consolidated to two)
  • 8 lawsuits over the Microsoft merger (four voluntarily dismissed)
  • 2 “220 complaints,” including the one from NYC
  • Plus: An SEC investigation and insider trading inquiries from the SEC and Department of Justice

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