Activision Blizzard loses $7 billion in value in 31 minutes as UK looks to halt Microsoft’s acquisition

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On 04/26 Activision Blizzard (WoW, Call of Duty) stock plummets more than 10% ahead of the IPO. The value of the gaming conglomerate fell by about $7 billion in half an hour. The reason for this is a message from Great Britain: The antitrust authorities there are planning to object to the purchase of Activision Blizzard by Microsoft. That lovely $95 bounty is in jeopardy.

This is the situation:

  • In January 2022, Microsoft announced it would buy Activision Blizzard, offering a price of $95 per share, which would then be paid out to shareholders in the event of a takeover. In total, it’s about 69 billion US dollars. It would be the biggest deal in gaming ever.
  • Activision Blizzard’s stock market value, which was hit by a sexism scandal at the time, skyrocketed on the stock exchange. From around $64, it skyrocketed to $81. Huge deal for shareholders.
  • But for the deal to go through, you need the okay from various regulatory authorities around the world. Because when two such large corporations merge, there is a risk of a monopoly being formed, which endangers the market.

    • Above all, “Call of Duty” is considered a point of contention that Sony repeatedly attacks:

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    Cloud gaming as the sticking point preventing the giant merger

    That’s what the authorities in Great Britain say: The UK antitrust authority (CMA) has decided to oppose the merger of Microsoft and Activision Blizzard (via insider-gaming). There are concerns that Microsoft could become even bigger in cloud gaming and that this could limit access to the growing market for competitors.

    It says:

  • Cloud gaming is growing rapidly in the UK, with revenues trebling between early 2021 and late 2022.
  • Microsoft would already be strong here and could benefit greatly from buying Activision Blizzard games and offering them exclusively.
  • Cloud gaming would allow gamers to go without expensive consoles and PCs and bring more flexibility.
  • The input from Microsoft, to agree to the purchase anyway, was not found very convincing.

    • Decision comes as a bit of a surprise – but some saw it coming

    Did you see that coming? At least there were hints. The authority had already indicated this decision in February. Activision boss Bobby Kotick reacted sourly and rebuked Great Britain: This would not create a European “Silicon Valley” (a tech Mecca), but a “Death Valley” (a dead zone).

    The journalist and expert Jason Schreier explains that experts had expected that the authority in the UK would agree. But he wasn’t very surprised. He has been writing for a year that the deal is by no means certain. Therefore, Activision Blizzard stock would also be around $70-75, not $95, most of the time.

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    Microsoft wants to appeal – Sounds angry and threatening

    How is Microsoft responding? Microsoft says it continues to fully support the purchase and will appeal the CMA’s decision.

    The decision “discourages technological advances and investment in the UK”.

    Activision Blizzard also says it will “aggressively” support Microsoft in its efforts to change the agency’s mind (via bloomberg).

    This is what it looks like when $7 billion in value fizzles out.

    How is the stock market reacting? Currently, the price has collapsed by 10% premarket. From $86.74 it went down to $78.07. Because Activison Blizzard has so many shares outstanding, the company has lost about $7 billion in market value.

    The first price drop occurred in 31 minutes: the stock fell from $86.94 to $76.12. After that she recovered a bit.

    This is behind it: We’re talking about billions of dollars here:

  • Those who believe the deal will go through expect the stock to be worth $95 sometime in the near future
  • But if the deal fails, Activision Blizzard’s price is likely to plummet

    • Ultimately, it’s like a bet, except that you’re not betting on the final result of a football match, but on how authorities decide, whose decision-making processes don’t seem exactly transparent.

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