Judge Rules Activision Executives, Including CEO Bobby Kotick, Must Face Lawsuit Over Microsoft Takeover
A Delaware judge has ruled that Activision Blizzard executives, including longtime CEO Bobby Kotick, must face most of a shareholder lawsuit accusing them of shortchanging investors during the company’s $75.4 billion sale to Microsoft.
In an 83-page decision issued Thursday, Chancellor Kathaleen McCormick of the Delaware Chancery Court said shareholders could move forward with their “core” claim that Kotick and other board members breached their fiduciary duties by prioritizing personal and managerial interests over those of shareholders.
The case, led by the Swedish pension fund Sjunde AP-Fonden, alleges that Kotick rushed into the deal to secure his position and an estimated $400 million in change-of-control benefits, while shielding himself from potential liability related to sexual harassment scandals at Activision. Shareholders further claim that the $95-per-share price undervalued the company—particularly as Activision’s performance improved during the 21-month regulatory approval process before the merger closed in October 2023.
Judge McCormick’s ruling found sufficient grounds to infer that Kotick “manipulated the sale process to favor Microsoft,” which she described as offering “speed, deal certainty, and—inferably—a friendly landing place.” She also found it “reasonably conceivable” that Activision’s directors placed Kotick’s interests above those of investors, potentially allowing a lowball sale while the company’s reputation and stock price were still weighed down by harassment allegations.
However, McCormick dismissed claims against Microsoft, noting there was no evidence the company actively participated in the alleged breaches, even if it may have “passively stood by.” Other secondary claims against Activision officials were also dismissed.
With the decision, McCormick signaled that “litigation on the merits of a trimmed-down version of the plaintiff’s complaint can now launch,” adding pointedly: “Game on.”
The case, Sjunde AP-Fonden v. Activision Blizzard Inc. et al, continues in the Delaware Chancery Court under docket number 2022-1001, marking another chapter in the post-merger fallout surrounding one of the gaming industry’s largest acquisitions.