Activision’s [ATVI] share price has been on a downward trend since peaking in early February. Shares in the gaming publisher had rallied 13.1% since the turn of the year to a 52-week high of $104.53 during intraday trading on 16 February.
However, Activision’s share price declined throughout the rest of the month and fell a further 2.7% in March. The stock rebounded slightly in April to close at $97.78 on 15 April, but it wasn’t long till Activision’s share price entered another challenging run.
By 4 May, Activision’s share price had fallen to an intraday low of $87.44 before closing at $88.69, marking a year-to-date decline of 4%. This trough heralded the start of a period of recovery for the stock, which closed 14 June at $99.18 — up 7.3% in the year to date.
Activision’s share price ended the month at $95.44 on 30 June, marking a 3.3% gain in the first half of the year and a 26.4% rise in the past 12 months. In comparison, the S&P 500 had climbed 14.4% and 38.6%, respectively, over the same periods.
While Activision’s share price performance has generally been strong for several years, the company has recently become embroiled in a boardroom brawl that could erupt into modern warfare if the Call of Duty publisher is unable to allay shareholder concerns.
Activision’s shareholder activism
An executive pay dispute has engulfed Activision. Despite the company laying off hundreds of employees during the coronavirus pandemic, CEO Bobby Kotick’s 2020 compensation package still totalled $154.6m.
The company has deferred its say-on-pay vote, which had originally been scheduled for 14 June but was controversially delayed in order to give shareholders more time to consider the pay proposals. The proposals scraped through at the reconvened meeting on 21 June with a 54% vote, the lowest approval rate that Activision’s executive pay proposals have ever received.
Valuation of CEO Bobby Kotick’s 2020 compensation package
CtW, an investment company that aims to hold “directors accountable for irresponsible and unethical corporate behaviour and excessive executive pay,” lobbied for holders of the Activision stock to vote down the proposals.
Advisory firm Institutional Shareholder Services (ISS) also labelled Kotick’s pay package “outsized,” according to MarketWatch. The firm drew attention to chief operating officer Daniel Alegre’s $12.6m 2020 paycheque. The COO’s base compensation is “above the company’s peer median for the CEO position,” according to ISS, as well as involving “a problematic life insurance prerequisite to the executive’s spouse”.
Kotick’s base salary and annual target bonus were both cut 50% to $875,000 for 2021, Eurogamer reports. However, the CEO can still earn 200% base salary bonuses. The bulk of this year’s $154.6m payout reportedly related to a 2016 goal of doubling Activision’s market capitalisation. Activision’s share price gained 148.3% in the five years to 30 June.
Activision's share price gains in 5 years to 30 June
It is not known exactly how many staff were cut during 2020, though with Activision’s Versailles office closed entirely (following a 2019 redundancy round that removed 134 of the office’s then 400 staff), the number is at least in the hundreds. The year saw Activision generate record sales of $8.1bn, as well as claim it needed to hire more than 2,000 new employees to meet demand. However, the slew of redundancies has continued in 2021, with almost 190 employees being let go in March, according to Screen Rant.
The gaming and esports industry has had a tough few months. The Roundhill BITKRAFT Esports & Digital Entertainment ETF [NERD] saw gains of 4.6% in the first half of the year. Activision is the fund’s 13th largest holding at 4.96% of its weighting as of 30 June.
On the other hand, the VanEck Vectors Gaming ETF [BJK] doesn’t carry the Activision stock and has performed much better through the year so far. The fund gained 13.4% in the same period of time. These gains are despite the fund’s largest holding, Flutter Entertainment [FLTR.L] as of 1 July, falling 13% in the year to 30 June.