Feds probe trades by entertainment titans ahead of Microsoft-Activision deal

Yahoo Finance's Alexis Keenan joins the Live show to report that the Department of Justice and the SEC are investigating possible insider trading by entertainment titans, including Barry Diller and David Geffen, over trades that gained on the Microsoft-Activision deal.

Video Transcript

BRIAN SOZZI: Federal prosecutors and securities regulators are investigating large bets made by a few big names ahead of Microsoft saying it would buy Activision Blizzard. Yahoo Finance legal correspondent Alexis Keenan has more on this. Alexis.

ALEXIS KEENAN: Hi, Brian. This report comes from the Wall Street Journal, saying that both the Department of Justice and the SEC are investigating multimillion dollar options trades in Activision Blizzard. It's a probe if those trades by three investors violated insider trading laws. Now those investors include IAC Media and Internet Services holding company chairman, Barry Diller, and also Diller's stepson, Alexander Von Furstenberg, and also record and film mogul David Geffen.

Now the three are said to have bought the right to purchase 4.1 million shares at $40 apiece in Activision. That was on January 14, just days before Microsoft announced its $69 billion acquisition of the company. Now at the time, the options were in the money. So Activision Blizzard was trading at about $63 a share at that time. In total, the three are said to have spent approximately $108 million on the deal. That's now worth about $60 million in unrealized profits.

The Wall Street Journal says the trades were privately arranged through JPMorgan Chase, which disclosed the arrangement after the deal became public. In an email, Diller told Yahoo Finance this. He said, none of us had any knowledge from any person or any source or any anything about a potential acquisition of Activision by Microsoft. He went on to say, if we had any such information, we would have never traded on it. It strains credulity to believe that we would have done so three days before Microsoft and Activision made their announcement.

Now Diller also reportedly told the Wall Street Journal that Von Furstenberg had been buying stock prior to these options trades. Now the three men do have ties to Activision CEO, Bobby Kotick. Diller previously served along with Kotick on Coca-Cola's board. Geffen and Diller are also said to be close friends. They're also former colleagues. Von Furstenberg, for his part, serves on the board of Diller's IAC. Yahoo Finance has also reached out to those other two investors, has not yet received a response from them. Back to you guys.

BRIAN SOZZI: Alexis Keenan, thanks so much.