Activision investors are now investigating whether the Bungie split involves securities fraud

    
56
Back again, etc.

Two days ago, Activision and Bungie announced an early split of their long-running partnership, a split that transferred publishing rights for the franchise back to Bungie itself. Bungie was full of plans to flesh out and continue the existing roadmap and presumably , and Blizzard was reassuring everyone that Destiny 2 would remain on Battlenet, but whoa there, back the truck up.

Apparently some investors got their hackles up over the split and moved to investigate it as a class action. “The investigation concerns whether Activision and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices,” says the attorneys’ press release.

“On January 11, 2019, the Company disclosed that it would be separating from its design and development partner Bungie, Inc. (‘Bungie’) and that Bungie will assume full publishing rights and responsibilities for the Destiny franchise. Bungie had developed the Destiny franchise with Activision as publisher. In the first five days of the Destiny franchise’s release, it sold $325M at retail. Following this announcement, Activision’s stock price fell sharply during intraday trading on January 11, 2019.”

Specifically, it fell as much as 13% yesterday. It lost nearly 20% last year following the “disappointing” Forsaken launch and BlizzCon bomb. As we’ve previously reported, Activision’s CFO was recently fired and then poached by Netflix (the exact timeline there still isn’t clear).

Some investment analysts are calling Activision’s moves a “clandestine restructuring” and expect revenues from Blizzard’s core titles in 2019 to continue to decline. “The recurring theme from most of these comments from analysts cutting their price targets (and even from analysts like Blair, and Morgan Stanley as well, who didn’t), is that Activision’s decision to cut ties with Bungie increases uncertainty about Activision Blizzard’s growth outlook,” The Motley Fool’s Rich Smith writes. “At the same time, most analysts remain optimistic about the stock, and generally agree that Activision will ultimately power through these changes.”

Source: Press release. Cheers, Zora.
newest oldest most liked
Subscribe to:
Alyn
Reader
Alyn

MurderHobo
Reader
MurderHobo

Reader
Kevin McCaughey

Activision is really its’ own worst enemy at the moment. They have so much amazing and quality IP but they are burying themselves in some sort of emergence of an evil corporate intelligence that it taking over what they do. It’s like some huge AI is now making (bad) decisions about all their games and what they say and do in public. Blizcon being a prime example.

Reader
John Mynard

Artistic endeavors, which gaming is, shouldn’t be put on by public trading. It complicates the relationship between the artist and his customers.

Our whole economic system is addicted to ‘growth’ at any cost, including sustainability. Such that, the first company in history to pass one trillion dollars in valuation, Apple Computer Company, is now perceived to be staring down the barrel of a gun, despite the fact that they cleared nearly $100 billion last year.

Maybe I’m old fashioned, but I’d prefer stability and make $100 in a given cycle, but be around for dozens of cycles than make $150 for a cycle or two and then be out of business. It’s a crappy analogy, but it’s sound.

We’ve been running on pure greed and now it’s coming back to bite us.

Reader
Sorenthaz

God I really hate how investor-driven gaming companies are becoming.

The big AAA companies are in need of a good crash/burn to wake up and get their acts together though. Or at least free the creative talent that used to be the ones innovating. I think the gaming industry needs a good shakeup so it’s not getting creatively choked so badly by investors and corporations wanting to play it safe and milk folks via exploitative methods (lootboxes etc.).

Reader
Bruno Brito

They became that a while ago already.

Reader
Kevin McCaughey

IT’s got a LOT worse this last 5 years or so though. Look at CAll of Shitface and similar titles and how the gameplay has gone south in the last 5 years especially. Game releases are just AWFUL at the moment. I had a hard time trying to think of GOTY material for 2018 – it was just fucking awful. I have been gaming since the Amstrad CPC 464 in the early 80’s and this is the worst it has ever been in my experience. I can recommend “Worth a buy” on Youtube for a better explanation of all this.

Reader
Kevin McCaughey

And Fallout 76 – Jesus! This is just about the worst game since that one they had to bury in a pit in the desert over 40 years ago! Gaming is fucked right now.

Reader
Bruno Brito

I’m not denying that. I’m just saying this isn’t new.

Reader
Loyal Patron
Patreon Donor
Armsbend

2017 was hardly any better. 2019 will be infinitely worse than both years. The only studio putting out anything is Ubisoft and Amazon (maybe?).

Reader
Mr.McSleaz

As long as the “AAA” Companies continue to have Share Holders, they will continue to get scummier & scummier in their quest to continually increase profits.

Reader
Zora

When I stumbled upon the press release I thought it had to be a prank but it was real, the way things go there’s got to be some serious lack of communication for investors groups to feel they are being bypassed when it comes to important decisions

I doubt it will amount to much in court (if it even comes to that) but I felt it was quite surprising to see it happen to begin with, ATVI being so ferociously protective of its public image of endless positivity… amusing times ahead!

Reader
Loyal Patron
Patreon Donor
Armsbend

Like raf said below – it happens to public companies all of time. At least once a week you read about it. It is not considered frivolous. When an investor group puts in 10s of millions of dollars they want all information available. Always remember – stock holders are the owners of companies and need to make informed investment decisions. It isn’t really gambling.

Reader
Zora

I hear as much and that oughta be the thing that puzzles me the most: did the board actively believe investors would just look the other way without asking for explanation?

Sooner or later they’ll have to be informed, I am not familiar with their inner workings but reason would suggest this is the worst possible way of controlling the narrative because it shakes confidence… bizarre to me, but I won’t argue against financial customs :P

Reader
Loyal Patron
Patreon Donor
Armsbend

To add – a guy who owns a 100 shares? Who cares. It is the institutional investors who when they call then the CFO or Kotick picks up the phone. If something was held from them – it’s a deal.

Fidelity and Vanguard together own $4,000,000,000 worth of ATVI stock alone. You can bet your ass they better get every piece of information the company can deliver. It is their company. Together they literally own 7% of the company. If Kotick held back negotiations with Bungie to those guys? Not good.

Reader
PanagiotisLial1

I think what will happen is we will all run out on popcorn soon

Reader
Mr.McSleaz

The Great Popcorn Shortage Of 2019!

Reader
Loyal Patron
Cosmic Cleric

Do not worry. In case of emergency, we can switch over to caramel corn.

Reader
Mr.McSleaz

Bungie’s escaping The Plantation. I guess there’s still hope for that Studio after all.

Xijit
Reader
Kickstarter Donor
Xijit

They probably paid their way out: Activision looked at how much money they could expect from D2 (not much) plus how much it would cost to develope D3 over the next couple of years & said “Make us an offer” to get a short term lump of cash.

Probably bad for the company in the long run, but good for the executives who would get shit canned by the board of directors if Activision tried to tell them “hey, guess what: we are operating at a loss and none of you are getting paid.”

Reader
Jack Kerras

Activision has made 2.1 billion dollars on Destiny 2. o_o

They wanted to make 2.2. It’s ‘disappointing’ only by insane constantly-increasing-profits-or-the-company-is-already-dead corporate shenanigans, and the game still made four times as much as the Destiny franchise’s entire 10-year investment was sent to give to the studio, and that is ONLY on Destiny 2; Destiny 1 also made all that money back and then a whole lot more.

To think that Destiny is making short money is foolish; it’s completely possible that Destiny has an (incredibly healthy) audience which will continue to buy the games they make from heretofore, and the game has paid back many times its actual costs both in D1 and D2. Either game’s profits would have paid for both, and the third of it or so that Bungie gets to keep from a contract perspective (after paying back the investment from Activision) is easily more than enough to pay for D3.

Or, if they’re smart, to drop numbers altogether and continue building on their world unto the point where Destiny is a single evolving ecosystem and not a franchise that puts out numbered sequels.

Xijit
Reader
Kickstarter Donor
Xijit

But everyone who was gonna buy Destiny 2, already has bought it, and cash shop spending for it has never panned out like Activision wanted.

If only 100 people are buying crap from the cash shop, the game is still dead in their eyes even if it still has 1,000,000 active players.

And yes: both games made a shit ton of money, but that was years ago and they already spent all if that. Companies don’t usually bank their profits. They either spend it on other products, cash it out to Executive Bonuses, or pay it to the investors.

Destiny 3 is going to have to be a PS5/ Xbox-Whatever title, instead of a another PS4/Xbone rehash of D1’s engine and assets (like D2 was), and that is going to take Boku-Bucks … Like $400 – $600 million isn’t an absurd number.

Activision went all in on hitting the Chinese Mobile jackpot, and then got throw out of the casino after they had pumped all their money into chips. Diablo-Mobil is going to tank since they already have people lining up to boycott it, WoW-Mobil and Overwatch-Mobil are not going to faire much better, COD-Mobil might make some money but it will not be the billions they are hoping for.

So now they are standing around with dick in hand, no viable projects ready to ship this year, and probably a billion dollars short of how much money they told investors they were gonna make.

Time to gut payroll & offload assets to get enough money in the bank to placate investors … Cutting ties with Bungie by selling them back the Destiny IP does both, so does driving out most of Blizzard’s veteran developers & then extending Blizzard’s contract with NetEase.

Reader
Jack Kerras

Of course it hasn’t. They’re rarely selling something compelling, and frankly folks just don’t -want- to use Eververse; I see people getting packs and such, but I can count on one hand (in a thousand hours!) the number of times I’ve seen someone just open a big glut of boxes in my sight.

A million active players is a HUGE playerbase, and every time DLC comes out, it will sell about that well. This is especially true when Bungie starts shedding the corporate-money-grubbing bullshit that Activision no doubt foisted upon them in order to boost their sales, which have never been weak.

Activision’s lack of capacity to see what makes Bungie special and work with it instead of against it is a perennial problem with the series which should, if there is a fucking God, be solved by the total lack of their presence in Bungie’s boardrooms.

Also: yeah, Activision’s chasing a hugely lucrative thing when it comes to mobile games, but mobile games are functionally a young man’s game; making your giant AAA studio do mobile games is a waste. There are small, tight mobile companies that make mobile games which make -fucking bank-, and the skillsets engendered by those developers are vastly different than the folks who make Diablo, Destiny, et al. They’re not about making monetization systems and finely honing their sales funnels… they’re about making games that people want to buy, and both Bungie and Blizzard obviously still do that.

I understand what Activision has to do here, and that sucks for them, but they brought this on themselves in the biggest possible way.

Not to mention the fact that I think the way big business works generally is 100% bankrupt, and the process of inventing money with accounting tricks or by buying small one-year EBIDTA companies and packaging them up to sell as large three-year EBIDTA companies (also essentially inventing money, similar to packaging bad mortgages but without selling them at a reduced price) or requiring non-stop growth always, no ceiling, is just an insane suicide pact. It’s insane, and the ‘get me money now’ bullshit we see nowadays is only possible because people used to plant trees they knew they’d never sit in the shade of.

We don’t build shit that lasts anymore, and where Bungie and Blizzard used to be our equivalent of hand-crafted, antique-building artisans, they’ve been bought by fucking Ikea and make nothing but pressboard garbage that folks will just throw away on moving day.

If Bungie can get out from under that, more power to them. I hope they manage. It’d be awfully nice if Blizzard decided to tell Activision to fuck off, too; they do NOT have the mobile market firmly in hand yet, so letting go of the market they have been kings in for a decade and a half was a profoundly bad idea, and no doubt driven by the same profit-seeking, money-now-and-damn-the-torpedoes bullshit that has driven Activision’s other decisions.

Mobile games don’t make lifelong fans. Final Fantasy does, Warcraft does, Diablo does, Halo does. Letting people who make games do what they do best is far better than chasing whatever fad is making bank this month, and if Activision learns this lesson by crashing and fucking burning, it’s richly deserved (if unfortunate for all the folks whose jobs Activision has more or less devoured).

Reader
John Mynard

I think it important to remind everyone that that .1 Billion is representative of $100,000,000 dollars. That is nearly a full year of studio operation for Bungie at maximum output.

Reader
Dankey Kang

12 days into 2019 and it does not at all seem that this year will be any less odd than the last.

Reader
Kickstarter Donor
Loyal Patron
Jack Pipsam

Anything to hurt Activision top-brass is fine by me.

Reader
Nathan Aldana

I mean. it wont.

theyll offload the financial losses to the grunt employees.

Reader
John Mynard

Grunt employee can’t engage in securities fraud. This C-Level chicanery.

If they are indicted, they aren’t employable any more at the very least. If they are convicted, much of their ‘golden parachute’ will be consumed by any fines that are levied and there’s a good possibility that they go to jail for a period of time.

Reader
rafael12104

So, first. This isn’t unusual. When a stock drops that dramatically, institutional investors pull out their lawyers to hopefully defray the cost of the loss. These are long term players and they own large quantities of shares.

Many of you remember a few years ago when EA launched Battlefield IV in that horrid almost unplayable state? A class action suit ensued claiming negligence and fraud. And then, it all faded away.

I’m pretty sure the same thing will happen here.

One thing though, I think Activision is in serious trouble generally and there is cause for their ninja restructuring.

I’m now really worried about Blizz because god only knows what the bean counters and finance guys at the holding company have planned to generate quick infusions of cash.

Reader
Kawaii Five-O

We already know what their plans are–mobile titles for all of their IPs with their “best” devs working on them. It sounds like that’s their only plans given how hard they really tried to sell their fans on mobile, insisting that they’re passion projects that their devs are eager to be working on.

Given the reaction to Diablo Immortals and the subsequent departure of their CEO and CFO, Blizzard must be in full panic mode right now.

Reader
Jack Kerras

It is SUCH a bad idea to put a core development studio on mobile games.

And yeah, stuff at Blizz has got to be 200% crazy. :/

Reader
Bruno Brito

Given the reaction to Diablo Immortals and the subsequent departure of their CEO and CFO, Blizzard must be in full panic mode right now.

Good.

Reader
Loyal Patron
Patreon Donor
Armsbend

It isn’t unusual but obviously Activision was cooking something up with Bungie and didn’t give any guidance. Regardless of Destiny’s success or lack thereof – revenue will go down. This was a part of the revenue stream – and now it isn’t to the tune of a few billion bi-annually. That makes a financial look bad no matter how you slice it.

Lawsuit justified in this case.

Reader
rafael12104

There is no question how they frame this in the next financial call with investors and their end of quarter report will make a huge difference.

And there it is no question that this separation did come out of left field for most of us including investors. However, some analysts and press outlets indicate that it was a troubled partnership and the warning signs were there.

So, I agree with you that Acti had something on the burner for a while. But is it fraud and or negligence as legally defined? Meh. From the cheap seats, it doesn’t look like it. But I’m sure the devil is in the details.

Reader
Loyal Patron
Patreon Donor
Armsbend

No clue myself – but it is certainly worth exploring. No way it could have happened overnight, in a week or likely even a month.

My best guess is Activision got no pop what-so-ever from the free week during Black Friday and threw up their hands on the title. Bungie probably wanted to do Destiny 3 a better way and ATVI said no way.

Reader
rafael12104

Yup. This was planned well in advance. Black Friday sounds like the last gasp. But yeah, internally, it may have just gotten to the point that Bungie and ATVI couldn’t work together as they started their plans beyond D2.

Reader
Loyal Patron
Patreon Donor
Armsbend

Thats the trick though – if this was planned well in advance and they didn’t give a hint towards it – could be trouble. or you could argue it was kept under wraps to keep industry secrets.

Tbh, I don’t follow these common lawsuits after they are filed. No idea what the success rate is. It could be for a settlement so the investors get a pittance and the lawyers get their fee + cut.

Reader
rafael12104

Yup. Or if they hid their plans with misleading conversations and or updates. That could be enough.

But, it is likely it will all be settled before we know anything more.

However, as a consumer class action, if they get there, a settlement will be less likely.

K38FishTacos
Reader
K38FishTacos

We need to be clear that a class action suit of a bunch of consumers (gamers) claiming fraud is much different than and action for investors seeking share recovery.

And what does “fade away” mean in this context? I don’t know exactly what case you’re referring to. But if there is a settlement (which does happen) the case will go away. I don’t know what the actual outcome was in this case you reference. Would be interesting to see.

Reader
rafael12104

Fair enough.

“Fade away” simply implies that there was a great deal of attention and churn during the first few weeks and then silence.

Either the case was settled or the lawyers from the aggrieved party decided not to continue. Either way, no further updates or even inquiries from the media.

Reader
Utakata

Forgive me, but my pigtails are having a hard time wrapping themselves around this. Fraud suggests to me that Activision was intending to deceive investors for their own personal gain. If AV is losing money due to a stupid move instead, they’re not bilking anyone but their own bottom line. Therefor investors, buyer beware. But now they seem to be claiming AV is defrauding them in the fail? Sounds like a goalpost needs to be put back where it was. Or am I missing something? o.O

Reader
rafael12104

You are not wrong. Heh. The goalposts depend on who you are I suppose.

Fraud, though, does not require financial or personal gain. It is a misrepresentation that falsely leads to a desired outcome or action.

Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage.

Reader
Utakata

Goal post are usually based on the general understanding of what that means. In this case though, there appears to be an extended definition of what fraud is. But even so, based on what you quoted…I am still not seeing how this would be fraud, opposed to just making a poor judgement. Unless it can be proven AV made this decision knowing it would negatively affect their stock value without “conveniently” informing their investors.

Either way though, thanks for explaining that. :)

Reader
rafael12104

It is an open question, for sure. That’s why I mentioned that I don’t think it is fraud from where I’m sitting. BUT, if they can show that Acti tried to deceive shareholders by withholding information, or if Acti executives dumped stock in advance of the Bungie split? Oh, yeah. They will be in deep shit.

Reader
Loyal Patron
Patreon Donor
Armsbend

Investing, real investing, isn’t really buyer beware. Shareholders are owners of the company. They literally own the company. if you have 100 shares of ATVI then you own that ratio to the total number of outstanding shares of the company itself. Dictated by the SEC everything has to be above board. You can’t withhold major news – it is illegal. You must deliver that news in a timely manner. If there is a bombshell – good or bad – you have to deliver it.

For example – Apple recently lowered guidance – they told the public that their earnings would be going down significantly due to decreasing iphone sales. The stock price got destroyed. They knew this would happen but following the rules they had to.

Good, real companies don’t pull the rug on their owners. As a shareholder you have to do your research but at the same time it is a company’s duty to put as much information as they can out there. You could argue the increased revenue with Destiny on board is the reason for it’s current price. Take away those billions and it has to adjust downwards. The gaming press found out about it as the same exact time as investors who own a few billion in stock. That doesn’t seem right.

long winded sorry