Wall Street Expects Microsoft-Activision Deal to Fail

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Investors seem to have little faith in Microsoft succeeding with its plan of acquiring Call of Duty maker Activision Blizzard. Shares were trading 25% below Microsoft’s offer ahead of today’s vote by stockholders, and while the proposal has since been approved, a majority of Wall Street remains bothered by the risks surrounding the buyout. It’s believed that federal antitrust enforcers could block the acquisition, one that also requires approval by governments from around the world.

Wall Street Is Betting That Microsoft-Activision Deal Will Fail (Bloomberg)

Shares of the gaming juggernaut are trading 25% below Microsoft’s $95 offer, indicating investors see risk the buyout won’t close as planned. This risk premium is more than double that of Twitter Inc. following Elon Musk’s offer, and higher than most of the announced — but still pending — deals tracked by Bloomberg.

Tough-talk from President Joe Biden’s antitrust enforcers is fueling investor fears that the deal could be blocked or subject to delays even if it prevails, said Matt Perault of New Street Research. Plus, the deal will also need approval by other governments including the European Union and China.

The merger, which has until June 2023 to close, would make Microsoft the world’s No. 3 gaming company, and would give it ownership over two of the most recognizable gaming brands on the planet in Call of Duty and World of Warcraft. Microsoft would also gain control of Candy Crush developer King, which made $2.58 billion in revenue last year.

Microsoft sent shockwaves through the game industry when it announced that it had agreed to acquire Activision Blizzard in January. If successful, the deal would shift Activision Publishing, Blizzard Entertainment, Infinity Ward, King, Raven Software, Sledgehammer Games, Treyarch, and more under the interests of Xbox, although select franchises, such as Call of Duty, will continue to be released on PlayStation and other competing platforms.

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Tsing Mui
News poster at The FPS Review.

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