'MS Acquisition' Activision Controversy Continues... Sexual Harassment Accountability and Options Trading Investigation

[Asia Economy Reporter Jeong Hyunjin] Noise surrounding Microsoft’s (MS) planned acquisition of Activision Blizzard continues. U.S. authorities are investigating whether option trades made just before the acquisition announcement constitute insider trading, and issues of accountability for sexual harassment incidents within the company have also emerged.

The Wall Street Journal (WSJ) reported on the 31st of last month (local time) that the U.S. Department of Justice and the Securities and Exchange Commission (SEC) have confirmed that Bobby Kotick, CEO of Activision, met with Alexander von F?rstenberg, the stepson of Barry Diller, chairman of Interactive Corporation (IAC), a U.S. entertainment mogul, one week before MS announced its acquisition of Activision, and are looking into the matter.

U.S. authorities are investigating allegations of insider trading violations regarding an option contract made on January 14th, in which Chairman Diller, von F?rstenberg, and David Geffen, founder of Asylum Records, purchased Activision shares at $40 per share. MS announced the acquisition four days later, on January 18th. Since the stock price rose significantly after the option trade, the market estimates that exercising these options could yield profits of up to $60 million.

The U.S. Department of Justice is focusing its investigation on whether these option contracts violated insider trading laws. The SEC has also launched a separate investigation on the same charges. Since Chairman Diller serves as chairman of Coca-Cola’s board, where Kotick is a board member, and they have been long-time friends, there is speculation that information may have been leaked in advance. Geffen is also a friend of Chairman Diller.

WSJ cited sources saying that von F?rstenberg had a breakfast meeting with Kotick during the course of the judicial investigation. In response, Chairman Diller’s side stated that they were unaware of MS’s acquisition of Activision at the time of the option trade and believe that Kotick, as an expert, would not have discussed the deal with von F?rstenberg, who attended the social breakfast gathering with his wife.

Besides the insider trading issue, Activision is also facing criticism over its response to recent sexual harassment allegations. Activision is being sued or investigated by several government agencies, including the state of California and the SEC, following complaints from female employees about widespread sexual harassment, bullying, gender discrimination, and retaliation. The company is under investigation for how it handled employees’ claims of sexual harassment and workplace discrimination.

On the same day, four U.S. senators?Democrats Elizabeth Warren, Cory Booker, Sheldon Whitehouse, and independent Bernie Sanders, who leans Democratic?sent a letter to the Federal Trade Commission (FTC), which reviews corporate mergers and acquisitions, expressing concern that this acquisition could undermine employees’ demands for accountability and punishment regarding sexual harassment incidents at Activision. The FTC is currently reviewing whether MS’s acquisition of Activision could weaken competition.

As Activision has been embroiled in various controversies since the acquisition announcement, the market is also considering the possibility that MS’s acquisition may fall through. If MS withdraws from the acquisition, it must pay Activision $3 billion by the 18th of this month. Conversely, if Activision cancels the acquisition, it must pay MS $2.3 billion.