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Uncle Sam probes Activision for any insider trading

Troubled games maker reveals investigation amid Microsoft takeover

Activision Blizzard is under investigation for possible insider trading including claims CEO Bobby Kotick tipped off some investors to buy more shares before the $68.7bn Microsoft acquisition deal was announced.

The American games maker, known for top series such as World of Warcraft and Call of Duty, said it was cooperating with the Securities Exchange Commission and the Department of Justice, according to a securities filing.

"Activision Blizzard received a voluntary request for information from the SEC and a grand jury subpoena from the DOJ, both of which appear to relate to their respective investigations into trading by third parties – including persons known to Activision Blizzard's CEO – in securities prior to the announcement of the proposed transaction," the company stated on Friday in an 8-K submission.

"Activision Blizzard has informed these authorities that it intends to be fully cooperative with these investigations." 

The SEC filing did not list the names of any investors Kotick may have contacted before the Microsoft takeover deal was officially finalized. However, last month, the Wall Street Journal reported media moguls Barry Diller and David Geffen and businessman Alexander von Furstenberg purchased numerous Activision shares at $40 each on January 14, four days before the acquisition was announced.

The news of the all-cash deal hiked Activison's stock price, which had been previously declining for weeks as the company's reputation took a hit over a string of lawsuits alleging a toxic "frat boy" work culture. The three men reportedly made an unrealized profit of about $60 million as Activision's share price rose to over $82.

Diller, chairman and senior executive of media corps IAC and Expedia Group, and founder of the Fox Broadcasting Company and USA Broadcasting, denied any suggestion he and his stepson, von Furstenberg, and associate and film studio executive Geffen engaged in any wrongdoing. In statement, Diller said:

None of us had any knowledge from any person or any source or any anything about a potential acquisition of Activision by Microsoft. We acted simply on the belief that Activision was undervalued and therefore had the potential for going private or being acquired. And, if we had any such information we would never have traded on it – it strains credulity to believe we would have done so three days before Microsoft and Activision made their announcement.

Activision did not respond to our request for comment. 

Kotick was said to be stepping down from his role as CEO, a position he has held for more than three decades, after the acquisition process was approved. But the filing confirmed this was not negotiated before the deal was made, and that management has not thought about whether Kotick will have a future at the company.

"No discussions or negotiations regarding post-closing employment arrangements with Microsoft occurred between Microsoft and Mr Kotick prior to the approval and execution of the merger agreement and the transactions contemplated thereby, or have occurred subsequent to such approval and execution, through the date hereof," the filing said. ®

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