Activision Blizzard Faces Fraud Investigation After Bungie Divorce

On the surface, the breakup between Activision Blizzard and Bungie has been mostly amicable, despite tensions that ultimately led to the divorce. That has come as little consolation to investors, though, some of which have banded together in a potential class action lawsuit against Activision Blizzard in the wake of the separation.

The class action suit is being handled by Pomerantz LLC on behalf of investors. At present, the law firm is gathering investors to participate, and is investigating "whether Activision and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices." No suit has yet been filed.

At the heart of the investigation is Activision Blizzard's stock price, which "fell sharply during intraday trading on January 11, 2019." The company's share price went from $51.35 at the end of January 10, 2019, to under $47 the next day, following the announcement that Bungie would be splitting and taking its Destiny franchise with it.

Interestingly, the lawsuit does not specifically say that there was any wrongdoing associated with the split, though it certainly hints that there might be a connection.

"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," Pomerantz stated in a press release.

Since Pomerantz is investigating possible securities fraud and other potentially illegal activities, it's reasonable to assume the law firm is looking into whether executives at Activision Bungie sold off stock ahead of the split, with knowledge that a breakup was imminent. We're speculating here, but if that took place, the law firm might potentially file a suit on the basis of insider trading.

That said, shares of Activision Blizzard are up slightly in early morning trading today, having increased 1.84 percent to $47.40.