While it seemed that last week’s reports that Activision-Blizzard would buy its independence from the financial wreck of Vivendi Universal would be good news for everyone involved, one Activision shareholder is crying foul. According to GamePolitics, stockholder Todd Miller filed a lawsuit on Thursday claiming that the plan to use cash stockpiled by Activision—as well as that of newly formed investment groups created by Activision CEO Bobby Kotick and others—was unfair to shareholders.
The thrust of the complaint, it seems, is that Kotick and company were able to arrange a 10 percent discount on the stock buyback from Vivendi, which then enabled the purchasing groups to become the largest shareholder of the company. What’s worse, according to the suit, is that the deal offers no benefit to the shareholders not involved in the deal. Essentially, because of their position as “insiders,” Kotick and his co-investors had an unfair advantage and benefit from the deal.
“Upon closing of the deal, the insider investor group will become the company’s largest shareholder, holding approximately 172 million shares, or approximately 24.9 percent of the outstanding common stock,” says the complaint, adding that the investors will “score an immediate paper windfall of $664 million.”
I don’t know much about finance, stocks, or really even business, but it sure does sound to me like Miller has a point with this suit. The fact that Kotick and his compatriots were able to swing this deal at all is almost undoubtedly due to his position as the boss at Activision. It’s not likely that Miller would’ve been able to rally his own fellow shareholders and negotiate a ten percent discount to buy Vivendi out of its controlling interest, so from that angle, I can easily see the justification for a suit like this.
That said, what I do know is that Vivendi owes all kinds of money, while Activision-Blizzard has been making money hand over fist for years. Vivendi’s controlling interest in Activision left the game publisher susceptible to the whims of its corporate parent, and news was swirling that Vivendi would be raiding Activision’s piggy bank to help bail it out of its own debts. Activision had nothing to do with those debts, and would’ve been in a far worse position financially had that happened. This deal, then, seems like it would save the company from being subject to such machinations in the foreseeable future. And in that regard, isn’t that a win for Activision’s shareholders?
It’ll be interesting to see where this goes, and whether or not a judge rules that the deal would in fact be a breach of the law. We’ll update this story as it develops.