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Securities law firm Robbins Geller Rudman & Dowd LLP filed a class action suit on Tuesday against Electrionic Arts on behalf of Ryan Kelly and any other investor who purchased EA stock between July 24 and December 4.
The complaint, filed in the U.S. District Court for the Northern District of California, names not only EA but some of its top executives – including Peter Moore, Andrew Wilson, and Blake Jorgensen – as defendants.
Kelly claims EA mislead investors about the quality of Battlefield 4 in an effort to boost share prices, which his legal team argues is a violation of the Securities Exchange act of 1934.
Battlefield 4 has become notorious for its bugs. While other games in the series have had their share of hiccups, the controversy around the glitches in the latest iteration is reminiscent of the Sim City launch debacle.
With DICE and EA scrambling to squash bugs, share prices began to fall. In response, the publisher pulled workers from other projects to help find and eliminate errors – halting development on the studio’s other projects.
In doing so, the legal challenge states that the company has further damaged its financial outlook for the coming months.
This might not be a problem by itself, but the individually named defendants all sold at least $1 million of EA stock before the bugged release drove stock down. Frank Gibeau, president of EA Labels, made $5.69 million just two days after BF4 launched on October 31.
The publisher’s new CEO Andrew Wilson made a smaller sale on July 26, pocketing more than $1 million.
Selling off stock doesn’t suggest confidence in a company’s future, so the complaint uses this fact to argue executives knew about the game’s issues.
In Gibeau’s case this might not be particularly sound – an executive knew a game wouldn’t pass muster with fans or critics would probably not wait until after release to sell stock – but there’s still the matter of the damage to EA’s release schedule and any damage to the publisher’s brand after months of glowing reports to investors.
“We couldn’t be happier with the quality of the games our teams are producing or the early reception those games are getting from critics and consumers," COO Moore told investors just three months before the release of Battlefield 4.
This case highlights the importance of the first person shooter to EA’s investors. Where was the class action suit after the Sim City debacle?
On the other hand, there’s a reason to be upset about such a high-profile launch. Sim City probably had the wider appeal, but this represents a failure to deliver on a core gaming franchise during the transition to a new console generation so its understandable that investors are out for blood.
If the investors can prove EA knew such troubles were brewing on a key franchise it could be a bumpy ride for the publisher and its executives.
EA has issued a statement denying the allegations, saying: "We believe these claims are meritless. We intend to aggressively defend ourselves, and we’re confident the court will dismiss the complaint in due course."
