Activision faces SEC options inquiry
Shares of Activision Inc. slid nearly 6% after the company disclosed Thursday that the Securities and Exchange Commission had launched a formal investigation into the way the Santa Monica video game publisher accounted for stock options over a 13-year period.
Analysts said the company’s own inquiry into stock-option backdating had apparently failed to satisfy SEC regulators.
The federal agency had conducted an informal inquiry after Activision, publisher of games such as “Guitar Hero” and “Tony Hawk,” launched an internal probe in July. The internal review found that 3,450 stock options were improperly dated and held four people accountable: the former heads of the human resources, legal and finance departments, and an outside lawyer who served as a secretary to the board of directors.
“The SEC had two options -- to close the informal investigation or to step it up,” said Colin Sebastian, an analyst at Lazard Capital Markets. “This obviously was not the preferred outcome. But the backdating issue is not new for Activision. So unless the SEC uncovers something new, we can expect they will have a similar conclusion as Activision’s own internal investigation, assuming the company has followed due diligence.”
Activision’s shares fell $1.11 to $18.46. In addition to concerns about the SEC probe, investors also reacted to worries about slow sales of Sony Corp.’s PlayStation 3 console, said John G. Taylor, managing director of Arcadia Investment Corp. Sony on Tuesday confirmed layoffs at its U.S. offices in Foster City, Calif., because of losses in its game unit.
