Barry Diller denies insider trading on Microsoft, Activision deal as DOJ and SEC investigate him and Geffen

Kara Swisher, CNBC’s Andrew Ross Sorkin, Martha Stewart, and Barry Diller at CNBC’s “The Next 25” Gala in New York.
CNBC | Nbcuniversal | Getty Images

Entertainment mogul Barry Diller strongly denied the idea that he, his stepson, and longtime pal and fellow mogul David Geffen engaged in insider trading in what he claims was was “a lucky bet” on Activision Blizzard call options reportedly now under investigation by the Justice Department and the Securities and Exchange Commission.

Diller, Geffen and Diller’s stepson Alex von Furstenberg together made large bets on Activision stock shares just days before that videogame maker said it had agreed to be bought by Microsoft on Jan. 18, The Wall Street Journal reported Tuesday evening.

Activision shares and the value of those call options soared on public news of the deal.

Diller, who confirmed to The Journal that he had been contacted by regulators, in a statement to CNBC, said, “None of us had any knowledge from any person or any source or any anything about a potential acquisition of Activision by Microsoft. ”

“We acted simply on the belief that Activision was undervalued and therefore had the potential for going private or being acquired,” Diller said.

“And, if we had any such information we would never have traded on it – it strains credulity to believe we would have done so 3 days before Microsoft and Activision made their announcement.”

Diller had told The Journal, “It was simply a lucky bet.”

The trio have an “unrealized profit of about $60 million on the options trade, based on the recent Activision share price of around $80,” according to people familiar with the trades, The Journal reported.

The newspaper said that Justice Department is conducting a criminal probe into whether the options trades were in violation of insider-trading laws, while the SEC is conducting a civil investigation of the same question.

The SEC and the Justice Department declined to comment to CNBC.

Geffen and Von Furstenberg, who is the son of Diller’s wife, the legendary fashion designer Diane von Furstenberg, did not immediately respond to requests for comment.

Microsoft declined to comment. Activision did not immediately respond to a request for comment.

Diller is a member of the board of directors of Coca-Cola.

Last week, Activision Blizzard’s CEO Bobby Kotick said he would not stand for reelection as a director of Coke, saying he wanted to devote attention to the Microsoft deal.

Other investors besides Diller, Geffen and von Furstenberg may have seen an opportunity amid the turmoil at Activision Blizzard before the deal was announced.

The company’s stock, which was trading at close to $100 per share last June, had fallen to nearly $57 per share by early December.

That slide began after California state regulators in July filed a gender-bias lawsuit against the company.

The slump accelerated in November after the company announced game delays, and after The Journal reported that Kotick had known for years about allegations of sexual assaults and mistreatment of female workers despite his claims to the contrary.

At the time of the share price declines, there was considerable speculation that the company would agree to be sold, or that another CEO would be picked to replace Kotick.

By the end of December, Warren Buffett’s company Berkshire Hathaway had bought almost $1 billion worth of Activision shares.

Buffett last month posted a letter saying the purchases of shares were made by an investment manager who operates independently of him at an average price of $77 per share in prior months. Buffett also wrote that Berkshire Hathaway “had no prior knowledge” of the deal with Microsoft.

– Additional reporting by Steve Kovach

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