The Securities and Exchange Commission and the Department of Justice have launched separate investigations into possible insider trading.
IAC/InterActiveCorp chairman Diller, his son-in-law Alexander von Furstenberg, and music mogul David Geffen bought options to buy Activision stock at $40 each on January 14, days before Microsoft agrees to buy Activision for nearly $70 billion on January 18.
The three spent about $108 million for the right to buy 4.12 million Activision shares. The options are now valued at $168 million and have an unrealized profit of $60 million based on Activision’s current stock price of around $80, WSJ estimated.
In an email to Insider, IAC quoted Diller as saying, “None of us had knowledge of any person or source or anything of a potential acquisition of Activision by Microsoft. We acted simply on the belief that Activision was undervalued and therefore had the potential to go private or be acquired and, if we had such information, we would never have traded it – it forces gullibility to believe that we would have done it 3 days before Microsoft and Activision made their announcement.”
In addition to being von Furstenberg’s stepfather, Diller is also close friends with music mogul and DreamWorks Pictures co-founder Geffen.
The options trades were arranged privately through JPMorgan. The bank reported the transactions to law enforcement after the Microsoft-Activision deal was announced, the WSJ reported.
It’s not just these three whose Activision-related investments have raised eyebrows. Last month, billionaire investor Warren Buffet denied he or his team knew about the deal when Berkshire Hathaway bought a nearly 2% stake in Activision in October and November.
In January, Microsoft announced its acquisition of Activision, the leading video game publisher famous for its Call of Duty franchise, in an all-cash deal valued at approximately $68.7 billion.
It would be Microsoft’s biggest acquisition ever and the biggest acquisition by a video game company in history. The announcement caused Activision shares to jump 26% on January 18.