Activision falls 7% after report says CEO knew of sexual-misconduct allegations for years

• Activision fell 7% on Tuesday after a WSJ report alleged CEO Bobby Kotick knew of sexual misconduct allegations for years.
• Kotick allegedly didn't inform the board of directors of some reports, including alleged rapes.
• Hundreds of Activision employees staged a walk out on Tuesday in response to the report.

Activision Blizzard fell as much as 7% on Tuesday after a report from The Wall Street Journal alleged that CEO Bobby Kotick knew of sexual misconduct allegations for years and didn't inform the board of some issues, which included alleged rapes.

Internal Activision documents show that Kotick "knew about allegations of employee misconduct in many parts of the company. He didn't inform the board of directors about everything he knew...even after regulators began investigating the incidents in 2018," the report said.

The Securities and Exchange Commission has subpoenaed Kotick over how Activision handled reports of misconduct and disclosed them to the public. That could pose a problem for the company if it's found that Kotick withheld certain information from investors that should have been disclosed.

The Wall Street Journal report comes just a few months after the video-game developer was sued by California for workplace discrimination and fostering a "fray boy" culture that resulted in years of sexual harassment for female employees.

In late September, Activision reached an $18 million settlement with California, though concerns of potential ethics violations surrounding the case mean it is still ongoing.

Activision employees aren't happy with management and have expressed their frustrations with a walkout in recent months. More than 200 Activision employees staged another virtual and physical walkout on Tuesday in response to The Wall Street Journal's new report.

Some Activision employees want Kotick to resign, and are also calling for an independent review of the company.

For now, that seems unlikely given Activision's board of directors responded to The Wall Street Journal's report with a statement in support of Kotick.

"The Board remains confident that Bobby Kotick appropriately addressed workplace issues brought to his attention," the statement said.

While the board remains confident in Kotick, investors have been spooked by the reports of misconduct, with Activision Blizzard shedding about $20 billion in market value since it was sued by California in July.

Shares of Activision Blizzard are down 28% year-to-date, leading the decline among its video game peers Take-Two Interactive and Electronic Arts, which are down 14% and 3% over the same time period, respectively.