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Why Activision Blizzard Stock Was Losing the Game Tuesday

By Danny Vena – Nov 16, 2021 at 12:59PM

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A news report suggests that the video game titan's CEO has long been aware of allegations of misconduct by employees.

What happened

Shares of Activision Blizzard (ATVI 0.80%) lost ground on Tuesday, slipping as much as 7.1% and briefly touching a 52-week low. As of 1:04 p.m. EST, the stock was down 5.8%.

The catalyst that sent the video game publisher downward was a disturbing news report that suggests its CEO was more aware than he had previously admitted of alleged misconduct within the company.

So what

Activision Blizzard has been embroiled in controversy in recent months after a raft of reports came to light regarding discrimination and sexual harassment in the workplace.

But on Tuesday, the public's view of the company took another turn for the worse after an article in The Wall Street Journal asserted that CEO Bobby Kotick had not only been aware of many of the allegations, but had failed to inform the board of directors about them. 

Smiling girl wearing headphones playing a video game on her computer.

Image source: Getty Images.

Previously, Kotick repeatedly told Activision Blizzard's executives and directors that he wasn't aware of many of the allegations while downplaying others. At the same time, he reportedly reached an out-of-court settlement with one alleged victim after attorneys threatened to file a lawsuit back in July 2018.

Now what

This is yet another black eye for Activision Blizzard, which revealed in September that "it continues to work with regulators on addressing and resolving workplace complaints it has received." At that time, Kotick said, "There is absolutely no place anywhere in our company for discrimination, harassment, or unequal treatment of any kind." 

Given that Kotick has apparently been aware of the ongoing issues at the Activision unit for some time -- and failed to take any decisive action to deal with them -- his words would seem to ring somewhat hollow.

The Securities and Exchange Commission has been investigating the allegations of workplace misconduct and discrimination, and has reportedly subpoenaed the company and many of its senior executives -- including Kotick -- regarding Activision's mishandling of the issues and its failure to disclose them. 

This follows a gender-bias lawsuit filed in July by the California Department of Fair Employment and Housing. Activision's preliminary response -- which refuted the allegations -- sparked outrage and a walkout by employees. 

It might be best for investors to avoid Activision Blizzard stock until the company truly gets its house in order.

Danny Vena owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool has a disclosure policy.

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