By Max Botwinick, GW Law, 2L
Activision Blizzard is a dominant video game creation company that has been a force in the industry over the past decade, spawning games such as Call of Duty and Candy Crush. Seeking to capitalize on its tremendous success, the company courted Microsoft, which bought the company for nearly $70 Billion.
While the sale was highly publicized, the company is now making news for all the wrong reasons.
Last spting, the Wall Street Journal reported that multiple investors had made plans to make significant purchases of Activision Blizzard stock just a few days before the announcement. Once the announcement was made, the cumulative profit for these investors soared to approximately $60 Million. According to the Wall Street Journal’s report, at least one of the aforementioned investors had met with Bobby Kotick, Activision’s CEO, the week before the investors purchased Activision stock.
This report led to the Securities and Exchange Commission (SEC) to open an investigation into Kotick’s activities. The SEC is aiming to uncover whether or not he engaged in insider trading by providing specialized information to these investors, which was used to make a significant profit. Rule 10b-5 of the code of the SEC prohibits corporate officers and directors, in this case, Bobby Kotick, from using confidential corporate information to reap profits or avoid losses by trading company stock. Additionally, this rule prohibits said company officials from “tipping” confidential corporate information to 3rd parties, in this case the 3 investors. Since these investors made significant trades to acquire Activision Blizzard stock, the SEC believes an investigation is required to determine if there was any foul play involved, specifically Kotick tipping to said investors.
Since the investigation began, Activision Blizzard has gone public, stating that the firm has received notice from the SEC about the ongoing investigation and plans to be fully cooperative with their investigation into the matter. Activision Blizzard’s cooperation with this investigation may go a long way in helping the SEC conclude their investigation at a faster pace.
This insider trading case is another example of how growth in the esports industry is sparking a new set of problems.