Top Class Actions reported that Plaintiff Andrew Trampe filed a securities class-action lawsuit on behalf of similarly situated investors against CD Projekt, developer and digital distributor of video games. The suit alleges that the company made "materially false and misleading statements" about the release of its highly anticipated game Cyberpunk 2077 that caused an artificial inflation of its stock prices. As a result, shareholders sustained financial damages upon the revelation of truthful information that the company concealed and/or failed to disclose, which violated federal securities laws under the Securities Exchange Act of 1934:
- Section 10(b) of The Exchange Act and Rule 10b-5. The company "employed devices, schemes, and artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or engaged in acts, practices and a course of business that operated as a fraud or deceit upon the plaintiff and others similarly situated in connection with their purchases of the Company’s securities during the Class Period.
- Section 20(a) of The Exchange Act. The company's officers and directors failed in their duty "to disseminate accurate and truthful information with respect to the Company’s financial condition and results of operations, and to correct promptly any public statements issued by the Company which had become materially false or misleading."
Specifically, the complaint claimed that with regard to Cyberpunk, the video game developer stated:
- On January 16, 2020, that Cyberpunk 2077 was “complete and playable," and that the game’s release date would be delayed until September 7, 2020, because it “needed more time to finish playtesting, fixing and polishing.”
- In its annual report released in April 2020, the company updated the release date to September 17, 2020, due to "additional time to fully playtest, bugfix and polish the game, thus ensuring that customers receive a top-quality product."
- At a press release on September 4, 2020, CD Projekt's CEO and President of the Management Board, Adam Michal Kicinski said, "today we started preparing for the final certification, so we’re very close. Of course, we’ll work on the title till the very end; that’s kind of normal. It’s a huge game, but as we said –everything is on track and we’re planning to launch it on 19 November." He added, "[T]he current version, which will be released in November, will be playable from the beginning when next-gen consoles are released; you will be able to play the current-gen version on next-gen from day 1."
- On October 28, 2020, Kicinski announced a three-week delay "to fix issues with the Current-Generation Console versions." He stated that while Sony and Microsoft certified the game, more time was needed for "optimization processes."
- On a conference call to discuss quarterly results, Kicinski stated, “We believe that the game is performing great on every platform...The game will be launched on PC, Xbox One, PlayStation 4 and Stadia. Just days ago, next-gen consoles were released and our title will run great on Xbox Series X and S, as well as PlayStation 5 from the very
beginning, thanks to their backward compatibility. We are excited to be able to bring our game to more players than ever before." However, when asked about potential bugs, he said, "So, in terms of bugs, we are all aware of them. Of course, such a big game can't be just bug-free. That's the kind of obvious, but we believe that the level will be as low as to let gamers not see them."
In short, the plaintiff alleged that CD Projekt made false and/or misleading statements and/or failed to disclose that:
- Cyberpunk 2077 was virtually unplayable on the current-generation Xbox or Playstation systems due to an enormous number of bugs;
- as a result, Sony would remove Cyberpunk 2077 from the Playstation Store, and Sony, Microsoft, and [it] would be forced to offer full refunds for the game;
- consequently, CD Projekt would suffer reputational and pecuniary harm; and
- as a result, Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times."
Finally, CD Projekt released Cyberpunk 2077 on December 10, 2020. "Consumers soon discovered that the Current-Generation Console versions of Cyberpunk 2077 were error-laden and difficult to play." Due to mounting criticism, the company held a press conference and Kicinski admitted "After 3 delays, we as the Management Board were too focused on releasing the game. We underestimated the scale and complexity of the issues, we ignored the signals about the need for additional time to refine the game on the base last-gen consoles. It was the wrong approach and against our business philosophy. On top of that, during the campaign, we showed the game mostly on PCs."
Following the release, the CD Projekt's securities dropped from its close of "$27.68 on December 9, 2020 to close at $20.75 on December 14, 2020, a drop of $6.93 or 25% over 3 trading days, damaging investors." Its common share stock price "fell $21.65 per share, or 20.1%, to close at $86.00 on December 14, 2020, damaging investors."
The following week Sony offered a full refund for gamers who purchased Cyberpunk 2077 and removed it from its Playstation Store "until further notice." Microsoft followed suit in offering consumers a refund. Again, stock prices fell 15.8% and its common share dropped 10.45%.
Trampe claimed that "As a result of Defendants’ wrongful acts and omissions, and the decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages."
Class members consist of "persons or entities who purchased or otherwise acquired publicly traded CD Projekt securities between January 16, 2020 and December 17, 2020."