Activision Receives Subpoena on Insider Trading, MGM Investor Diller Not Mentioned

Posted on: April 17, 2022, 01:38h. 

Last updated on: April 17, 2022, 08:04h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Activision Blizzard (NASDAQ:ATVI) said it’s aiding federal authorities probing insider trading activity in the video game publisher’s equity and derivatives prior to a January takeover offer by Microsoft (NASDAQ:MSFT). MGM Resorts International (NYSE:MGM) investor Barry Diller and his associates weren’t mentioned by the Call of Duty producer.

Barry Diller
IAC Chairman and MGM investor Barry Diller. Activision says it’s cooperating with a probe that could pertain to his options trades in the video game company. (Image: CNN)

In amended 8-K filing with the Securities and Exchange Commission (SEC), Activision says it received a voluntary request for information from the commission and grand jury subpoena from the Department of Justice (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. Activision Blizzard has informed these authorities that it intends to be fully cooperative with these investigations,” according to the filing.

While Diller isn’t directly mentioned in the filing, he, his stepson Alexander von Furstenberg, and entertainment mogul David Geffen are being investigated by the DOJ and the SEC. The probe is regarding options trades they made on Activision prior to news of Microsoft’s $68.7 billion all-cash takeover bid becoming public.

IAC/InterActiveCorp (NASDAQ:IAC) Chairman Diller dismissed the options trades as lucky bets. But the Wall Street Journal reported last month that von Furstenberg met with embattled Activision CEO Bobby Kotick prior to the release of the takeover news.

Diller MGM Ties

To date, the casino company hasn’t commented on the investigation.

Diller’s IAC took a 12% stake, then valued at $1 billion, in MGM Resorts in August 2020. As a percentage of MGM shares outstanding, IAC is by far the casino operator’s largest shareholder. For now, it appears the options trading investigation will have no impact on IAC’s relationship with the gaming company.

Last month, the Nevada Gaming Commission (NGC) said it will delay licensing Diller, 80, pending into an inquiry by the Nevada Gaming Control Board (NGCB) into the options trading issue. Diller and IAC CEO Joey Levin are both members of MGM’s board.

With Activision, Controversy Abounds

Microsoft moved on Activision after the video game publisher’s stock slid in the wake of an investigation by the California Department of Fair Employment and Housing (DFEH), which alleges Kotick ignored several years worth of sexual harassment claims at the company.

The controversy doesn’t end there. Last week, Bloomberg reported that Melanie Proctor, DFEH assistant chief counsel, resigned following the firing of DFEH Chief Counsel Janette Wipper. Proctor alleges Gov. Gavin Newsom’s (D-CA) office interfered with the DFEH investigation to the aide of Activision attorneys. The governor’s office denies the claims.

On another note, Warren Buffett’s Berkshire Hathaway bought 14.6 million shares of Activision in the fourth quarter, in advance of the Microsoft takeover news. But the famed investor’s conglomerate has not been the subject of any regulatory scrutiny for that trade.