CD Projekt Risks Fine After Publishing The Witcher 3 Sales Numbers

According to a couple of reports from websites and, CD Projekt is currently under investigation for its decision to skip proper channels and only divulge the sales numbers of The Witcher 3: Wild Hunt with an open letter to gamers. As expected, the information immediately had a direct effect on the company's share price, which increased by a very significant 26% margin.

According to Polish law, confidential information that can impact the share price of the issuer (CD Projekt SA in this specific case) has to be communicated to the Financial Oversight Commission and the company that operates the regulated market (Warsaw Stock Exchange), in addition to the general public. This information has to be communicated via the appropriate channel, the ESPI (Electronic Information Transfer System), a platform developed to fulfill the law and provide an even playing field for investors.

CD Projekt, of course, has already provided its own version of the events and defended its conduct. According to investor relations manager Karolina GnaÅ›, the press release was directed mostly to gamers, to thank those who have already supported the title and hopefully convince those who haven't to make a purchase. Additionally, GnaÅ› argues that notes such as these are standard in the games industry. 

Given I'm versed in neither Polish nor law, much less when they're combined, I asked Polish law graduate Michał Filipiak to offer me a rundown of the events. In his words:

To say that the legal framework governing stock markets is complex and difficult to understand would be a tautology. I will try to make this understandable for people without 5 years in legal boot camp (also known as university).

There are two legal acts that are related to this case: Act on public offerings and conditions for introducing financial instruments into an organized trading system and publicly traded companies, from July 29th, 2005, and the act on financial instrument trading, also from July 29th, 2005.

The first act mandates, in article 56, section 1, that the issuer (CD Projekt) is obligated to reveal certain kinds of information to the Financial Oversight Commission (Komisja Nadzoru Finansowego), the company that operates the regulated market (GieÅ‚da Papierów WartoÅ›ciowych w Warszawie, Warsaw Stock Exchange), and to the general public.

Article 56, section 1, point 1 clarifies that confidential information (as defined by article 154 of the act on financial instrument trading) is one type of information subject to this disclosure.

Article 56, section 1a states that the Financial Oversight Commission gathers this information and guarantees consistent, public access to the information. In practice, this has resulted in the development of the Electronic Information Transfer System (Elektroniczny System Przekazywania Informacji, ESPI) to serve as a platform for exchanging this information, fulfilling the requirements set forth in law.

As such, the issuer is obligated to disclose the information using the specified channels. This does not mean that they are forbidden from disclosing it through other means, but simply that the specified channel must be a part of the process - to ensure an even playing field for investors.

The second part of the puzzle is whether or not the sales figures for The Witcher 3 qualify as confidential information (in the sense used by the acts above).

Article 154 section 1 of the act on financial instrument trading defines it as information that is related, directly or indirectly, to one or more issuers, which has not been disclosed to the general public, and could affect the price of financial instrument.

Two of the three qualifiers are already present: The sales figures are directly related to CD Projekt and at the moment of the revelation have not been publicly disclosed. Though one could potentially argue that these are just "meaningless statistics", the fact that CD Projekt's share price spiked to nearly 25 zł ($6.80 or 6.04 Euro) from a bit over 20 zł in 24 hours means that this is information that dearly affects the share price. The last time the company experienced this share price was at the moment of The Witcher's release.

At market close on Friday, June 12, the share price has stabilized at 22,56 zł per share, a full 10% higher than its price on June 8.

Now, the brass tacks. The Financial Oversight Commission has launched an inquiry into the situation as CD Projekt has not fulfilled its legal obligation to release this information to investors through mandatory channels - namely, the ESPI.

Instead, the sales figures were published on social media. The move was described as a marketing press release by CD Projekt's investor relations manager, Karolina GnaÅ›. According to her statement, CD Projekt intended to thank gamers for their trust and to convince those who have not yet purchased the game that it's a global hit. She also states that this is a move frequently employed by the largest companies in the industry.

Regardless of the ubiquity of the move or the size of CD Projekt, the company has neglected its obligations. While Mrs GnaÅ› might be referring to the express ban on combining disclosure with marketing information (specified in article 56, section 3 of the act on public offerings etc.), sales figures are hardly marketing information.

Beyond the KNF, investors have also reacted to the move with hostility. Adam Kiciński, CEO of CD Projekt, has initially stated that the sales figures would be published in the company's biannual report (also mandated by law), at the end of August. The premature announcement has put a dent in investor relations, as they were effectively misled by the company.

Spotted first on NeoGAF. Many thanks go to MichaÅ‚ "Tagaziel" Filipiak, for the notes he provided and also for helping me understand the reports involved and the generalities of the case.