Activision Tumbles on Insider Sales

Updated from 9:11 a.m. EST

Shares of Activision(ATVI) tumbled on Thursday, after CEO Robert Kotick and 12 other insiders sold off about 5% of the company's shares in a block trade.

Citigroup (C) acquired the 7.1 million shares after the close of trading on Wednesday, according to a regulatory filing made public Thursday morning. In recent trading, Activision shares were off $3.38, or 14%, to $20.52.

The drop in the stock is understandable, analysts said. The company's shares have soared in recent months on improving results and the speculation that Activision may be acquired, they said. Following the stock sale, the company may well lose the acquisition premium that investors have accorded it, with investors reading the sale as an indication that the company won't be acquired any time soon.

"Clearly the sale will pressure the stock in the near term," said Friedman Billings Ramsey analyst Shawn Milne in a research report Thursday morning. However, Milne maintained his outperform rating on the company's shares, and his $28 price target. (Activision has not been a recent investment banking client of FBR.)

In its regulatory filing, the video-game publisher sought to play down the significance of the stock sale, noting that none of the insiders was selling more than one-third of his or her stake in the company. The move represented the first time that Kotick or Brian Kelly, the company's co-chairman, had sold shares since May 2002, the company said.

"The sales were...made to take advantage of a brief trading window and do not reflect any individual or collective judgment about the company's prospects," the company said in the filing. "The sales were made to enable senior management to diversify their personal holdings."

All of the shares sold were already in the company's share count, meaning that the stock sale shouldn't affect the company's per share earnings, noted Michael Pachter, an analyst with Wedbush Morgan, in a research report Thursday.