Eye on Insiders: Activision Blizzard

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at what the action has been like at Activision Blizzard (Nasdaq: ATVI  ) over the past year.

Business Description

One of the world's leading publishers of video games, and owner of the massively popular World of Warcraft online game.

Recent Price

$11.98

CAPS Stars (Out of 5)

*****

Percentage of Shares Owned by Insiders

0.41%

Net Buying (Selling)*, last 12 months

($162.5 million)

Last Buyer (% Increase)

Vivendi Universal
5,700 shares at $16.61 apiece on Sept. 12, 2008
(Purchase bolstered direct holdings by less than 1%)

Last Seller (% Decrease)

Brian Kelley, Director
1,498,858 shares at $12.26 apiece on June 2, 2009
(Sale represented 0% of remaining direct holdings)

Competitors

Microsoft (Nasdaq: MSFT  )
Take-Two Interactive (Nasdaq: TTWO  )

CAPS Members Bullish on ATVI Also Bullish on

General Electric (NYSE: GE  )
Johnson & Johnson (NYSE: JNJ  )

CAPS Members Bearish on ATVI Also Bearish on

Electronic Arts (Nasdaq: ERTS  )
Netflix (Nasdaq: NFLX  )

Recent Foolish Coverage of ATVI

A Hot 5-Star Stock Idea: Activision Blizzard
These 5 Underdogs Are No Dogs
Will Activision Kill Sony?

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of July 21, 2009.)
*Open-market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Personal holdings are what matter most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view
Few investors who aren't already short will be excited by the volume of shares Activision Blizzard's insiders have sold. But this story may not be as bad as it looks.

Kelley, the most recent seller, sold all those shares on behalf of the "800370D Trust," for which he is an investment advisor and beneficiary. The rest of his Form 4 filing is littered with activity, but all of it is options-driven. In this regard, note that all the options he exercised were exercisable beginning way back in May 2001, October 2001, or April 2003. Kudos to him for holding them so long.

As for the 727,274 Activision Blizzard restricted stock units he held before his varying options exercises and sales began on May 29, they were still in his account when the (ahem) storm of activity ended on June 2. He still has a vested interest in delivering value to shareholders.

So does company CEO Robert Kotick, who still directly held 124,880 common shares after his last sale in June. He also held 484,849 restricted stock units and 2.5 million "performance shares" -- shares that vest only if the stock gains a certain amount. From the latest proxy statement:

The performance shares will vest in 20% increments on each of July 9, 2009, 2010, 2011, and 2012, with another 20% vesting on December 31, 2012, in each case subject to our attaining the specified compound annual total stockholder return target for that vesting period. The performance targets increase for each vesting period. If we do not achieve the performance target for a vesting period, no performance shares will vest for that vesting period. If, however, we later achieve a performance target for a subsequent vesting period, then all of the unvested performance shares relating to prior vesting periods will vest on such subsequent vesting date. [Emphasis added.]

Presuming the performance targets aren't set too low, this is a pretty good deal for shareholders. But that's my take. Do you agree? Disagree? Log into CAPS today, and tell us how you would rate Activision Blizzard.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get your game on with related Foolishness:

Take-Two Interactive is a Rule Breakers recommendation. Activision Blizzard, Electronic Arts, and Netflix are Stock Advisor selections. Johnson & Johnson is an Income Investor recommendation. Microsoft is an Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


Read/Post Comments (14) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 21, 2009, at 3:23 PM, QwertyHero wrote:

    What the hell? Can you translate that for us? Does the insider activity indicate that we should be thinking about buying or selling???

    Good grief.

  • Report this Comment On July 21, 2009, at 3:53 PM, ReadEmAnWeep wrote:

    I think the point was that, yes there is a lot of insider selling and hardly any buying, but look at the reasons and its not such a bad sign.

  • Report this Comment On July 21, 2009, at 4:17 PM, kpinvest wrote:

    It's important not only to know what management is doing with their stocks, but the reasoning behind it. It seems like a rather large stake, but apparently it was with a good reason.

    Sometimes it just raises an eyebrow :)

  • Report this Comment On July 21, 2009, at 5:49 PM, srun wrote:

    A bit confusing, yes... However, this has been dumbed down quite a bit. The answer is YES, buy ATVI. For a multitude of reasons that go far and beyond The Fool's recommendation.

  • Report this Comment On July 21, 2009, at 8:17 PM, stockjock43 wrote:

    Well it seems a lot safer than other stocks that have had huge run ups thats for sure..same with take two but I like that in 7's

  • Report this Comment On July 21, 2009, at 10:48 PM, murthg1 wrote:

    I do not understand what this article means??

  • Report this Comment On July 22, 2009, at 8:41 AM, TMFMileHigh wrote:

    All,

    Thanks for the comments. My apologies that this one is a little thick with detail and finance-speak. The message I'm getting is that you would prefer a bit more explanation, and in simpler language. So be it; I'm here to serve you, the readers.

    Now, as for the takeaway: I think between Kotick's performance shares agreement and Kelley's neutral selling, we've found a group of insiders that is mostly bullish about their company's long-term prospects. I am, too.

    Thank you again and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On July 22, 2009, at 5:27 PM, nottheSEC wrote:

    Its way too much insider action and millions of shares all sales.I am sure the folks at GS,GE and major companies could cash in their options but I bet it is frowned upon in mass despite the fact it is compensation.They should leave something on the table for investor confidence or at least buy some.Couple this with delays on games and backlash on non Lan games.This may not be enough to not like the stock but I want a better entry price.

    Check out my red thumb pitch

    INSIDER SELLING

    A partial listing check for yourself here

    http://moneycentral.msn.com/investor/invsub/insider/trans.as...

    06/15/09 GRIFFITH MICHAEL J Sold 1.60 Mil

    06/02/09 KELLY BRIAN G Sold 3.71 Mil

    06/11/09 KELLY BRIAN G Sold 1.00 Mil

    05/15/09 KELLY BRIAN G Sold 2.49 Mil

    06/11/09 KOTICK ROBERT A Sold 1.50 Mil

    03/09/09 KOTICK ROBERT A Sold 1.24 Mil

    06/11/09 ROSE GEORGE L Sold 75,000

    06/05/09 MORGADO ROBERT J Sold 50,000

    http://www.gamasutra.com/php-bin/news_index.php?story=24259

    ....of holiday success for games like DJ Hero and Tony Hawk: Ride, Activision's year end could see some snags -- chief among them the increasing likelihood that Starcraft II won't make this calendar year.... But Starcraft II lead designer recently told consumer weblog Kotaku that the team plans to have a beta that will last "four to six months," leading Hickey to conclude: "We find it increasingly probably that the game will be released in [Activision's] fiscal '10 period."

    Hickey also called CEO Bobby Kotick's recent warnings that Activision could withdraw PlayStation 3 support by 2011 with no price cut "likely a realistic reaction to a near term breakdown in market growth."

    If hardware pricing stays high, Hickey says, it "could eventually compromise holiday sales expectations."

    "While we expect price cuts from Sony, Microsoft and Nintendo before the holiday, the ultimate timing and magnitude remain uncertain," he adds.

    According to Hickey, other areas of caution are a recent boost in Activision insiders selling shares -- "impossible to ignore," he says -- and increasing challenges for World of Warcraft.

    The analyst says that although the number of WoW players in China is higher, the average revenue per user is lower due to the specific business model -- and downtime in the transition from operator The9 to rival Netease could cause the player base to take a hit, even though the migration will mean higher royalties in the end.

    "We view looming competition in the West from new MMORPGs as a greater threat to WoW’s future then the current transition," he adds, including NCsoft's September launch of Aion as a possible competitive threat.

  • Report this Comment On July 23, 2009, at 1:10 PM, TMFMileHigh wrote:

    nottheSEC,

    Thanks for your comments. Be careful, though. Not all of the sales you list here are open market, and should be treated differently. Griffith, for example, exercised and sold restricted stock.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On July 23, 2009, at 1:10 PM, goodmikey wrote:

    Netease hosts WoW in china. I'm still not sure what the consensus is on ATVI...

    Personally, I think the Wow movie, Diablo III, and Starcraft II will definitely benefit the stock's price in the future. But, as for the immediate future? I'm not sure. This would have to be a long hold.

    Any other thoughtS?

  • Report this Comment On July 24, 2009, at 5:20 PM, brianc410 wrote:

    I think the CEO's ego is going to stall out this company...

    wouldn't touch it with a 10 foot pole.

  • Report this Comment On July 24, 2009, at 5:39 PM, jrush2525 wrote:

    Modern Warfare 2 will be the highest selling game of the year, that alone makes this stock a good buy.

  • Report this Comment On July 27, 2009, at 4:21 PM, QwertyHero wrote:

    I figure if the WoW movie is actually made - not only will it attract NEW WoW subscribers but also bring a lot of nerds back home to mama (so to speak).

    Additionally - The games coming down the pipe from ATVI look like they will be pretty decent. If any of them manage to lock in a fraction of the number of subscribers to WoW they will have a nother cash cow.

    Mooooooooooo!!!

  • Report this Comment On July 27, 2009, at 4:23 PM, QwertyHero wrote:

    Oh, and thanks for dumbing the article down for us knuckle-draggers.

Add your comment.

DocumentId: 946196, ~/Articles/ArticleHandler.aspx, 7/25/2014 2:15:34 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement