(CN) – Shareholders are suing video game company Activision Blizzard Inc. after a schism between the company and Bungie Inc. caused a fall in stock prices from the loss of one of the company’s flagship video game titles.
The sci-fi first-person shooter “Destiny” was a joint project between the companies until a split caused Bungie to walk away from the partnership with the rights to the franchise. The loss of the series has Activision shareholders questioning the details surrounding Bungie’s departure and the share price drops that followed.
Filed in the California Superior Court in Los Angeles County by lead plaintiff Siddharth Panchal, the complaint alleges that Activision breached its fiduciary duties and failed to maintain internal control of the company which led to a drop in Activision’s stock.
The news of Bungie gaining control over the franchise and the companies’ falling out caused a 9 percent drop in Activision’s share price to close at $46.38 per share in January 2019. In the weeks following the announcement and stock drop, Activision laid off roughly 800 employees as part of a “restructuring plan.”
Activision is a major publisher of many famous franchises including “World of Warcraft,” “Candy Crush” and “Call of Duty.”
The joint venture for “Destiny” contained a 10-year deal where Activision would have global publishing rights to all games developed by Bungie. The joint agreement was entered shortly after Bungie left its previous partnership with Microsoft in 2007, according to the complaint.
“The first Destiny game was released September 2014 and became the most successful new video game franchise launch during its time, selling more than $500 million orders on day one,” shareholders claim in the 43-page complaint. “Indeed, soon after the launch, the company announced that the franchise sold over $325 million worldwide in the first five days. Over the next few years, the company released several expansions to the franchise and a full sequel, ‘Destiny 2,’ which launched in September 2017. ‘Destiny 2,’ broke preorder records and record day-one performance on PlayStation Store.”
Despite the enormous popularity and sales resulting from the joint agreement, shareholders claim they were kept in the dark about the termination of Activision’s deal with Bungie and misrepresented the financial impact the loss of the franchise would have on Activision’s revenue.
The class is represented by Laurence M. Rosen in Los Angeles.