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Activision Blizzard To Follow Scandal Stocks Pattern

Vlae Kershner profile picture
Vlae Kershner


  • Most companies on my list of scandal stocks begin recovering within six months.
  • Activision Blizzard is down by more than one-third since reports broke out about sexual harassment and unfair treatment of women.
  • Pressure on CEO Bobby Kotick to resign is mounting.
  • If and when the Board of Directors forces him out, the stock is a buy.
Annual E3 Gaming Industry Conference Held In Los Angeles

David McNew/Getty Images News

For the last several years, I've been following "scandal stocks" - companies that have rapid declines due to negative news with a moral component.

In the typical cycle, a negative news report or government action triggers a stock decline. The pressure grows

This article was written by

Vlae Kershner profile picture
I am a 35-year stock market investor, MBA, and retired reporter and editor for the San Francisco Chronicle. I also was a featured investor with the investment app Netvest. My primary style is a mix of growth and income, with attention to special situations.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of TTWO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (64)

You were right on the money on this one Vlae. Great call and thanks for the tip.
Thanks once again Vlae. You called my attention to ATVI and it obviously worked out very well.
Purewater profile picture
Thanks Vlae, your article was the final push to get me to buy ATVI. Much appreciated!
19432511 profile picture
@Purewater Send him 5% of your profits to show your appreciation in tangible terms.
Vlae Kershner profile picture
@19432511 Now there's an idea!
market traderNYC profile picture
I concur, ATVI is a screaming buy at current levels. The firestorm surrounding the CEO will subside and eventually go away completely. There is a ton of value here.
Hold your nose and buy the stock. You will be pleased you did.
My first investment was Volkswagen after their scandal was nearing bottom. I was also in on the facebook and Equifax scandals. I contemplated the Boeing scandal but some of their fundamentals worried me so I passed on it. I certainly would not have taken a chance on Luckin if I was aware of it at the time. I love when these fundamentally solid companies are unjustly punished for these scandals that have little long term business impact. I agree 100% with your sentiment aside from waiting until the CEO is ousted. I've been eyeing Activision since $80 but found the valuation to be a bit rich. Today it is an easy choice to start DCAing into. So far my average is 58.7, I hope to see further retreat given the union busting that needs to occur now.

I'll be following you going forward, and I look forward to the next scandal you shine light on.
Vlae Kershner profile picture
@drakeshergill Thanks, Drake. Activision stock is acting like it's finding a bottom, so that seems smart.
Mozman profile picture
Witch hunt
09 Dec. 2021
Some assumptions seem to be based on the belief that all bad news are out already, and now everyone is waiting just for a resolution. This is quite risky as even more negative news may still come from ATVI's crisis. Even if the CEO is ousted, there may be further revelations (especially after his departure), new lawsuits etc. It could well be a ladder with more steps down.
Vlae Kershner profile picture
@carrs Thanks for commenting. Yes, it might not be the bottom--at Wynn it took another month after the CEO stepped down. But it's likely to be a lot closer to the bottom than the top.
@Vlae Kershner Saw a post stating another sexual harassment lawsuit.
Vlae Kershner profile picture
@Pops007 Thanks. I saw an article about employees trying to raise a strike fund though gofundme, which seems a little bizarre.
OptUndrWrtr profile picture
@Vlae Kershner Thank you for this outstanding article. Very brief yet full of great insight. The first article I have read from you and indeed one of the best I have read on Seeking Alpha in months. I'm going to start following you. Very well done! This will help me make a more objective judgment of whether to hop on ATVI.
EliasMouawad profile picture
@Vlae Kershner Nice article. I am bullish on ZNGA, which has been falling along the industry.
Vlae Kershner profile picture
@EliasMouawad Thanks, good luck with ZNGA!
Trade In Mexico profile picture
ATVI might be a takeover target article:

Mick Research profile picture
@Trade In Mexico seem not even rumors.
Vlae Kershner profile picture
@Trade In Mexico Thanks for the link, at $50 billion it wouldn't be easy for anyone to swallow.
CatchTheFallingKnife profile picture
@Vlae Kershner

$50B is current price, Takeover price would cost twice as much. No one can afford it, even for a deep pocket MSFT.
Trade In Mexico profile picture
ATVI had a very bullish reversal today, and it closed UP slightly even with the NASDAQ down about 300 points. That is a sign it has bottomed out and now many investors will buy in order to get in for the big rebound and shorts will start covering as they saw this key reversal today. With earnings estimates of nearly $5 per share for 2022, this stock is easily worth $100, which is where it traded earlier this year.
For similar reason I am thinking about buying Penn as well. The stock dropped because of earning miss and then dropped more because of sexual harassment allegation against Portnoy
Et20 profile picture
Ousting the CEO will do nothing for the stock or company. Show me the games.
@Et20 He didn’t even do anything wrong LOL
Drfer profile picture
@Stevaaayyy Every now and then I feel sorry for white males... then I see a post like this and I realize your demographic deserves everything that's coming your way. Thanks for reminding me to stay frosty.
Good article. Thanks for the analysis. I like 'scandal stocks' too. One not on your list that I sold this year was SolarWinds after they bombed last December. I probably did abut 30% on SWI in about 8 months.
One concern I have about ATVI is their CEO being there for 30 years and no succession plan. So everyone in any position of authority only knows one management style, plus he assembled the board too. How do you think a new CEO might affect things? For example, look at MSFT after Steve Ballmer (a business guy) took over from Bill Gates (a techie) after 25 yrs. Lots of disgruntled workers for years until Ballmer stepped down. The stock bombed.
Not saying I won't buy ATVI. Just interested in everyone's opinion.
Vlae Kershner profile picture
@GettingReal Thanks for mentioning Solar Winds as a good example, I might add it to my chart. How do you have such a good gain on it since it keeps going down?
@Vlae Kershner They spun out a separate division called N-Able for which SWI holders got 1 NABL share for every two SWI shares, so effectively a 2 for 3 share split. I bought SWI on Jan 6 for $14.45, then sold SWI shares on 30 July after the NABL spin out on 20 July, then sold the NABL on Nov 4 for $13.75.
Trade In Mexico profile picture
Why wait to buy for a ceo resignation when stock is way too cheap over sexual harassment that is in the past, if you wait for total resolution the stock price will be much higher. Plus this is not as serious compared to other examples you cited where people died or hugely expensive oil spill clean ups.

Activision has about $13 per share in cash and could announce a massive stock buyback any day now.

In July Charlie Gasparino reported that Netflix, Amazon, Facebook. Or Microsoft could be suitors to buy ATVI and that’s when it traded for $91 per share so again if you wait for a stock buy back or ceo change or buyout deal the stock will be up huge and you will miss the upside.

@vlae kershner BTW, I appreciate the scandal spreadsheet you created for all those companies and I have started following you.
1.21 Jigawatts profile picture
Had a small position with basis in the low 80s and have been averaging waaayyyy down over the past couple months. Bought in the 70s, all through the 60s, and most recently at 57. If anyone thinks the stock is likely to recover...which it is, and which most people do...then the time to buy is NOW, not "when the recovery starts". If you wait until then, you miss the first 10-15% movement up.

Long ATVI.
xkw123 profile picture
02 Dec. 2021
I still believe ATVI is the real deal in video gaming industry as a long time gamer myself, their games are icons and landmarks. Stocks have been trading on a negative sentiment for awhile, but nothing has affect the fundamentals. (If sometime argue the delay of new games is bad, think the opposite, look at what happen to early released games like Cyber punk 2077 and Amazon's New world.. all suffers from a premature release which all end badly. There is a reason why new version on Diablo games only come out every 10 years!) I agree with you that the stock price will eventually recover itself. In addition, having a 5 stars balance sheet means there is no problem holding this for the long term, stay long ATVI.
I believe that main reason of decline is negative sentiment because of harassment but the other problem is release delay of new games which means decline of earnings.
The stock is a buy regardless. Earnings and fundamentals will always trump woke nonsense in the long run. Where are the charges? Where is the evidence? Until I see some proof, I stand with Bobby✊🇺🇸
He himself has admitted that a huge problem exists and if he can't solve it he will consider leaving, so we are past denial. Not taking sides but yeah, it is past denial.
That is a good thing.
@Philbeer2051 Did he himself sexually harass anyone? If not, I don’t care.
The Beautyful One profile picture
The problem with ATVI is not their "scandal", that is a smokescreen. The problem is that their pipeline is broken and their innovative mojo is gone since years. The only question is whether both are linked and I, personally, doubt it. Blizzard put out great content when it supposedly was run by terribly people after all. ATVI greatest strength is the similar weakness of its competitors. Seeing how Battlefield is currently bombing at EA, it rather seems there is a fundamental problem with big companies and good game design. I doubt adding more "corporate oversight" and diversity hires will improve that.
7422981 profile picture
@The Beautyful One Don't underestimate the ESG force in this market, this scandal is definitely the source of selling. I don't say that what you point to is not a driver, but many large funds and institutions have probably sold so this name isn't on their list of holdings at year end.
The CEO could be a legend but these days, who cares? You can find another legend, you simply can’t have that behaviour tolerated as if its normal to spruce up the games at the expense of your female staff or anyone else for that matter. Seen that and its not pleasant when you see it happening to someone that works in the same company as you. Its really unacceptable to behave that way.
Vlae Kershner profile picture
@born_to_run Thanks for commenting, I worked for a company that had a good president who was forced out for something similar, it was a shame but it had to happen.
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