Blizzard shareholders sued against the company for withholding information about the real state of the company’s affairs. They assure that all management, including Bobby Kotick, knew about the harassment scandal but called the regulator’s inspections routine and not worth attention. So the lawsuit from the California Department of Fair Employment and Housing (DFEH) came as a big surprise to them. Investors continued to invest in the stock and suffered when Blizzard’s securities began to plummet in value after the lawsuit was filed.
The scandal with the regulator began on July 26, when it became known of the DFEH lawsuit against Blizzard, filed after a two-year investigation into discrimination and harassment within the company. The department sued the company, accusing it of lower wages and promotion opportunities for women compared to their male counterparts and sexual harassment. According to DFEH and company employees, management was aware of these incidents but took no action to resolve the situation.
Blizzard denies all of the allegations, calling them baseless and untrue. Some executives point out that the situations mentioned in the lawsuit are taken out of context and occurred more than a decade ago. Also, they assert, the company’s corporate policies had changed before the regulator’s investigation began.
On Aug. 3, Blizzard president and chief operating officer J. Allen Brack reported his resignation and the appointment of Jen Oneal and Mike Ibarra as the company’s executives. On the same day, the company got it collective claim from investors accusing her of deliberately withholding information about the DFEH investigation.
The lawsuit was filed in federal court in California by shareholder Gary Cheng, who has been buying the company’s securities for the past five years. The documents were handled by the law firm Rosen. Bobby Kotick, current Blizzard CFO Dennis Durkin, and former CFO Spencer Neumann are named as defendants.
According to the lawsuit, Blizzard management intentionally misled investors to cover up the situation with the regulator’s investigation. In support, the document cites several statements to the SEC filed by Blizzard since mid-2016. In them, the company argues that such legal claims and lawsuits are immaterial and cannot seriously harm the business. Investors are confident that numerous harassment and discrimination complaints against the company will lead to serious disruption of its business.
Because of the company’s failure to report its problems to the regulator, investors accuse it of deliberately inflating the value of its securities and demanding redress for the fall in their value. On July 27, the day after the DFEH lawsuit became known, Blizzard’s stock price fell 6.76%. At the moment, their value down to $79.83, down $10.34 from July 26.