On April 26, Activision Blizzard’s stock (WoW, Call of Duty) plummets by more than 10% before the stock market opens. The value of the gaming company dropped by about 7 billion $ in half an hour. The reason is a message from the United Kingdom: The local competition authority plans to appeal against Microsoft’s acquisition of Activision Blizzard. The attractive premium of 95 $ is at risk.
This is the situation:
- In January 2022, Microsoft announced that it intended to buy Activision Blizzard and offered a price of 95 $ per share, which would be paid out to shareholders in case of a takeover. Overall, it concerns 69 billion US dollars. It would be the largest deal in gaming history.
- The stock value of Activision Blizzard, which was damaged due to a sexism scandal, rose sharply on the stock market. From about 64 $, it quickly rose to 81 $. A huge deal for shareholders.
- However, for the deal to go through, approval is needed from various regulatory authorities around the world. Because in a merger of such large companies, there is a risk of monopolization that endangers the market.
- Especially Sony has been shooting against the deal for months and painting horror scenarios on the wall about how powerful Microsoft will become. There is a fear that Activision Blizzard could in the future offer the shooter “Call of Duty” exclusively for Xbox and no longer for PlayStation.
- Microsoft, on the other hand, constantly downplays itself.
Especially “Call of Duty” is seen as a point of contention that Sony repeatedly attacks:
Cloud gaming as a sticking point that prevents the huge merger
This is what the authority in the UK says: The relevant authority for competition law in the UK (CMA) has decided to oppose the merger of Microsoft and Activision Blizzard (via insider-gaming). They have concerns that Microsoft could become even larger in cloud gaming and this could worsen access to the growing market for competitors.
It is stated:
- Cloud gaming is growing rapidly in the UK; revenues have tripled from the beginning of 2021 to the end of 2022.
- Microsoft is already strong here and could benefit significantly if they acquire and exclusively offer the games from Activision Blizzard.
- Cloud gaming would allow players to forgo expensive consoles and PCs, bringing more flexibility.
- The submissions from Microsoft asking for approval to proceed with the purchase were not found to be very convincing.
Update: In a new article, we have looked at the first reactions from experts on whether the deal still has a chance:
The decision comes somewhat surprisingly – but some saw it coming
Did anyone see this coming? There were at least indications. The authority had already hinted at this decision back in February. Activision CEO Bobby Kotick reacted sourly and scolded the UK: 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 while experts expected the authority in the UK to approve the deal, he was not very surprised. He has been writing for a year that the deal is by no means secure. Therefore, Activision Blizzard’s stock has mostly been around 70-75 $ and not at 95 $.
Microsoft will file an appeal – Sounds angry and threatening
How does Microsoft react? Microsoft states that it fully supports the purchase and will appeal against the CMA’s decision.
The decision “discourages technological progress and investment in the UK”.
Activision Blizzard also states that it will “aggressively” support Microsoft’s efforts to persuade the authority to change its opinion (via bloomberg).
How does the stock market react? Currently, the price has plummeted by 10% in pre-market trading. From 86.74 $, it dropped to 78.07 $. Due to the large number of shares of Activision Blizzard in circulation, the company has lost about 7 billion $ in market value.
The first price drop occurred within 31 minutes: the stock fell from 86.94 $ to 76.12 $. Since then, it has already recovered slightly.
What’s behind it: This is about billions $:
- Those who believe that the deal will go through assume that the stock will be worth 95 $ in the near future.
- If the deal fails, the stock of Activision Blizzard is likely to plummet.
Ultimately, this is like a bet, except that one is not betting on the outcome of a football game, but on how authorities decide, whose decision-making processes do not appear to be very transparent.
More about cloud gaming:
The beta launch of Xbox Cloud Gaming is especially interesting for users with weak hardware
The news is being created in real-time and will be updated and expanded.
