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Activision Shareholder Sues Company Over Stock Buyback

by Ben Reeves on Aug 02, 2013 at 02:25 PM

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Last week, Activision Blizzard performed some fancy financial footwork in order to separate itself from parent Vivendi. Now, Activision Blizzard shareholder Todd Miller is suing the company over this deal.

Previously we've explained how Activision pulled together over $8 billion in order to buy back a controlling interest from its major stakeholder, the French mass media and telecommunication giant, Vivendi. Unfortunately, it seems that not everyone was comfortable with how this deal went down. Today Activision shareholder Todd Miller filed a lawsuit explaining that the deal gave Activision insiders a windfall of more than $600 million in discounted stock, whereas other Activision Blizzard shareholders saw no additional benefit.

According to Entertainment Law Digest, Activision plans to buy 439 million of Vivendi's shares for $5.83 billion, while Activision CEO Bobby Kotick's and his insider investor group snatched up 172 million shares in a private sale for $2.34 billion – this last sale comes at a 10 percent discount on Activision's closing price, and is the major sticking point for Miller.

According to Miller's suit "(T)here was no apparent business purpose in allowing the insider investor group to participate in the discounted stock offering, other than to aggrandize defendants Kotick and [Activision co-chairman Brian] Kelly and provide billions of dollars' worth of Activision stock to the insider investor group at a discounted price."

Miller also asks that the court rescind this agreement and prevent Activision from making any "future one-sided self-dealing."


Our Take
This isn't great news for Activision, but lawsuits rarely are. If Kotick and Kelly's investor group hadn't made a purchase, Vivendi's controlling portion (assuming that Activision itself bought as much as it could with the financing available) would still have been 37 percent. Vivendi would have still been the largest shareholder and could have likely still orchestrated it's special dividend action. While Miller might not like that Kotick and his group benefit from this, it is very likely that the personal money they put up made possible the continued health of Activision Blizzard.