Edited by: TJVNews.com
It appears that some major players in the media industry are under legal scrutiny for potential insider trading. The Wall Street Journal reported that media titan Barry Diller, music mogul David Geffen and Alexander von Furstenberg are being investigated by federal prosecutors and securities regulators on large bets that they made on Activision Blizzard Inc. shares in January, days before the videogame maker agreed to be acquired by Microsoft Corp., according to people familiar with the matter.
The Financial Times reported that in a transaction executed by JPMorgan, the three acquired Activision options for $40 per share on January 14. Activision shares closed at $65 that day.
The WSJ reported that people familiar with the matter said that the Department of Justice is currently investigating whether any of the options trades violated insider-trading laws. The Securities and Exchange Commission is separately conducting a civil insider-trading investigation, the people said.
The Financial Times reported that four days after the transaction was executed Microsoft said it would acquire Activision in an all-cash transaction valuing the company behind Call of Duty and World of Warcraft at $95 per share.
Sources told the WSJ that the three have an unrealized profit of about $60 million on the options trade, based on the recent Activision share price of around $80.
They had acquired about $108mn worth of Activision options, which are now worth about $168mn, according to the Financial Times. Microsoft’s acquisition of Activision has yet to close, but if completed the three could net more than $100mn, as was reported by the Financial Times. JPMorgan reported the trade to US authorities after the deal was announced, as the US bank is obliged to disclose any transaction where it has evidence or is concerned about any potentially illegal activity as part of a criminal settlement it reached in 2020 connected to market manipulation, said a person briefed about the matter, according to the FT report.
Speaking to the Financial Times, Barry Diller said, “None of us had any knowledge from any person or any source or any anything about a potential acquisition of Activision by Microsoft. We acted simply on the belief that Activision was undervalued and therefore had the potential for going private or being acquired. And if we had any such information, we would never have traded on it. It strains credulity to believe we would have done so three days before Microsoft and Activision made their announcement.”
The WSJ reported that Diller added that Alexander von Furstenberg had been “buying Activision stock prior to that and the thought was that Activision at some point would either go private or would be acquired at some point. Von Furstenberg is the step-son of Diller.
The FT report indicated that Diller, who leads IAC, which has backed a variety of internet media brands, including Tinder and Expedia, is a friend of Activision’s chief executive Bobby Kotick. The two also sit on the board of Coca-Cola, although the beverage company said Kotick would step down this year, as was reported by the FT.
Diller added that “because of the timing, we immediately told our lawyers to preserve everything because we were sure somebody would say, ‘Well, how could this be such a coincidence?’ It turns out, that’s all it is.”
Diller and Geffen have known each other for decades and consider one another as close friends. The FT report indicated that they both began their Hollywood careers in the 1960s after dropping out of UCLA.
The two started out as bottom rung employees at the William Morris talent agency, as was reported by FT. Diller became one of Hollywood’s most successful film and television producers and Geffen became a music mogul, but both built the bulk of their multibillion-dollar fortunes as investors, the report continued.
Diller led Paramount Pictures in the 1970s and 1980s, producing blockbuster films including Grease and Raiders of the Lost Ark, before building up Fox Broadcasting for Rupert Murdoch’s News Corp., according to the FT report.
Diller left Hollywood in the early 1990s to bet on the internet, creating IAC/InterActive, which has spun off numerous public companies including Expedia, Ticketmaster and Match Group. Geffen was one of the most successful music producers from the 1970s into the 1990s, working with artists such as Jackson Browne and releasing hit records for Bob Dylan, Joni Mitchell and Guns N’ Roses. Geffen, however, has made billions as an investor, betting on companies such as Apple and in hedge funds, as was reported by the Financial Times.