Many on Wall Street are betting the Biden administration is different. Activision stock is trading at $77.86 a share, $17.14 below the $95 deal price, but up $12.47 from where the stock was trading prior to the deal. Chris Pultz, a portfolio manager at merger arbitrage shop Kellner Capital, reckons that the current price implies a 50-50 chance the deal goes through.
Blame the regulatory environment. Seven months before the deal was announced, Lina Khan, a vocal critic of big tech, took over as FTC chair, though Democrats didn’t get a majority until May. Khan has long argued that the FTC and Justice Department should consider the effect on labor and other stakeholders before approving deals.
“It’s entirely possible that this is a high-enough-profile transaction, and, now that she’s at full strength at the FTC, that this provides an opportunity,” says Brian Quinn, a professor at Boston College Law School.
Activision disclosed in March that it and Microsoft received a second request for information, which requires companies to turn over documents and answer business questions.
The antitrust concerns seem overblown. If labor was ever a concern, it might no longer be one. The Communications Workers of America initially opposed the deal. But a group of workers at Activision-owned Raven Software voted in favor of the company’s first U.S. union under the CWA. Now, after reaching a labor neutrality pact with Microsoft related to Activision that kicks in 60 days after the deal closes, CWA President Chris Shelton says the union supports the deal.
“Getting the CWA on their side is definitely a good endorsement,” says Kellner’s Pultz.
The other worry: that Microsoft will keep Activision games off rival devices, particularly
ក្រុមហ៊ុន Sony
របស់
(SONY) PlayStation 5. Microsoft has said it plans to honor existing deals and release coming ការហៅរបស់កាតព្វកិច្ច titles on Sony’s consoles. “We believe the deal will benefit gamers, developers, and the industry,” Rima Alaily, deputy general counsel for Microsoft’s Competition Law Group, said in a statement to បារុនរបស់។
Cutting off competition would do little to help Microsoft attain its goals. To maximize Activision’s profits, the tech giant will want to reach gamers on Sony systems. Microsoft is also trying to bolster its Xbox Game Pass subscription service, and adding ការហៅរបស់កាតព្វកិច្ច និង ពិភពលោកនៃ Warcraft would help justify its cost and possibly bring new users into the Xbox ecosystem. That suggests the possibility that Microsoft could win in court, if it comes to that.
“I don’t think the FTC has a chance,” says Wedbush’s Michael Pachter. “And Microsoft knows that.” If he is right, Activision stock would trade at $95 when the deal closes, up 22% from Thursday’s close.
That doesn’t mean there aren’t risks. While Westchester Capital Management’s Roy Behren, who co-manages the
Merger Fund
(MERFX), with $4.3 billion in assets, believes there’s a greater likelihood that the deal goes through than the price suggests, he’s reluctant to advise investors to play it. “If you like gambling, the market is implying it’s better than a coin toss,” Behren says. “But it’s very, very difficult to recommend to a retail investor to make only a single arbitrage investment.”
If nothing else, investors need to be comfortable owning the stock if the deal falls through. Analysts expect overall bookings, a measure of sales, to dip 5.5% to $7.9 billion in 2022 after Activision delayed key games, before returning to growth, rising 20% to $9.5 billion in 2023. Earnings should fall 22% to $2.91 a share in 2022, before increasing 34% to $3.90 in 2023.
The stock is reasonably priced—it trades at 19.8 times estimated 2023 earnings, compared with a five-year average of 21.7, though above rivals
សិល្បៈអេឡិចត្រូនិ
(EA) and
កម្មវិធីអន្តរ - យកពីរ
(TTWO), which trade at 15.4 and 17 times, respectively. If the deal fell through and Activision’s multiple fell to 16.2—midway between its peers—its price would be $63.18, down 19%.
ចុះឈ្មោះព្រឹត្តិប័ត្រព័ត៌មាន
បច្ចេកវិទ្យាបារុន
មគ្គុទេសក៍ប្រចាំសប្តាហ៍ចំពោះរឿងរ៉ាវល្អបំផុតរបស់យើងស្តីពីបច្ចេកវិទ្យាការរំខាននិងប្រជាជននិងស្តុកនៅកណ្តាល។
But even a failed deal could be an opportunity. Benchmark analyst Mike Hickey noted in May that the offer bought Activision time to rebuild its culture after a wave of lawsuits and a settlement over charges of sexual harassment and gender discrimination. In a statement, Activision said it has “always been committed to a safe, welcoming workplace.”
Getting back to creating top games could lift the stock toward his fiscal 2023 $100 price target, Hickey wrote.
Microsoft has said it’s confident the deal will close in the fiscal year ending in June 2023. The vast majority of 27 analysts listed by FactSet give it a $95 price target. Even
Berkshire Hathaway
(BRK.A) has bet the deal will close by upping its stake to 9.5% of Activision’s shares. b
សរសេរទៅកាន់ ខនន័រស្ម៊ីធនៅ [អ៊ីមែលការពារ]