According to the lawsuit, Activision Blizzard's intentional failure to disclose these charges constitutes fraud as it artificially inflated its stock price. Investors claim that if they knew about the extent of the company's dilemma, they would never have invested in its stock.
This present lawsuit is mutually exclusive to the lawsuit filed by the California Department of Fair Employment and Housing (DFEH) over allegations of sexual harassment and discrimination within the company's workplace.
Activision Blizzard hit with its second lawsuit for allegedly misleading investors
The lawsuit was filed ahead of the 2nd Quarter earnings call and was filed on behalf of all investors that traded Activision Blizzard stock between the 4th of August 2016 and the 27th of July 2021.
It has been alleged that Activision Blizzard stock prices have been falling steadily over this class action period, during which time investors incurred damages as a result of the company's failure to disclose their ongoing problems.
According to the lawsuit filed by Rosen Law Firm, Activision Blizzard issued "materially false and misleading statements" which constitutes a violation of federal securities laws.
The Sarbanes-Oxley Act of 2002 (or "SOX Act") was passed to protect the public from erroneous and fraudulent activities and forces publically trading companies to release a SOX certificate each year.
This certificate, by legislation, must disclose any potential legal issues, investigations, audits or other procedures that could affect the value of the business. According to the lawsuit, Activision Blizzard did not comply with this legislation.
According to the lawsuit, top executives were aware of the sexual harassment and discrimination allegations but failed to disclose them in the SOX certificates during the class action period.
Chief Financial Officer, Dennis Durkin, said: "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” in his 2016 SOX certificate. This, according to the Rosen Law Firm is factually incorrect.
The Rosen Law Firm is the same firm that sued CD PROJEKT RED after the company butchered its launch of the Cyberpunk 2077 game title. The firm's present lawsuit has also taken fire at other top executives, including Bobby Kotick and Spencer Neumann, who were all alleged to be "instrumental in the spreading of false information".
Following the tumult, J. Allen Brack (Studio President at Activision Blizzard) has stepped down amidst the ongoing sexual harassment lawsuit and employee strikes.
We endeavour to provide further details regarding this matter as the story develops.
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Header image via Activision Blizzard.