A class action lawsuit filed today in the U.S. District Court of Central California on behalf of investors alleges that Activision Blizzard’s intentional failure to disclose its ongoing problems with sexual harassment and discrimination artificially inflated the company’s stock value. In layman’s terms, if investors had known the extent of Activision Blizzard’s issues, they wouldn’t have invested in its stock.
Activision Blizzard stock prices have been slowly declining since June 21, when news broke that the company was being sued by the California Department of Fair Employment and Housing over a workplace culture that has fostered years of abuse and discrimination targeted at female employees. With a Q2 earnings call happening later today, investors are understandably concerned over the state of the company they’ve invested in. Which makes today the perfect day for Los Angeles’ The Rosen Law Firm to file a class action suit on behalf of said investors.
The suit, which covers anyone who has traded in Activision Blizzard securities between August 4, 2016 and July 27, 2021, seeks damages based on the defendants’ violations of federal securities laws by issuing materially false and misleading statements during the class action period. The suit not only names the corporate entity Activision Blizzard as a defendant, but also CEO Bobby Kotick, CFO Dennis Durkin, and former CFO Spencer Neumann, three executives who the suit states were instrumental in the spreading of false information.
The contested information comes in the form of Activision Blizzard’s annual SOX certifications. SOX refers to the Sarbanes-Oxley Act of 2002, legislation passed to protect the public from erroneous and fraudulent activities by publicly traded companies. Every year companies must release a SOX certification, signed by executives, disclosing any potential legal issues, investigations, audits, or other procedures that could affect the value of the business.
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Here’s Activision’s SOX certification from 2016, as signed off on by Bobby Kotick and then CFO Dennis Durkin.
“We are party to routine claims, suits, investigations, audits, and other proceedings arising from the ordinary course of business, including with respect to intellectual property rights, contractual claims, labor and employment matters, regulatory matters, tax matters, unclaimed property matters, compliance matters, and collection matters. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity.”
The class action lawsuit claims that Activision Blizzard and its executives were aware of the company’s issues of rampant sexual discrimination and workplace harassment during the periods these SOX certifications were issued and knowingly left out that information. The final sentence in the statement, in particular, reads false but has remained unchanged since 2016, appearing most recently in Activision Blizzard’s 2020 fiscal year-end report. As the events of the past couple of weeks have proven, ongoing claims and investigations have indeed had a material adverse effect on Activision Blizzard’s business.
It sounds like The Rosen Law Firm has a pretty solid case on its hands. And in case the firm rings a bell, it’s the same one behind the class action investor lawsuit filed against CD Projekt Red following the disastrous release of Cyberpunk 2077.