Activision Blizzard Inc. Chief Executive Officer Bobby Kotick walks the grounds after the morning session during the Allen & Co. conference in Sun Valley, Idaho, on Thursday, July 13, 2017.
David Paul Morris | Bloomberg | Getty Images
Shares of games publisher Activision Blizzard fell to their lowest on Wednesday since Microsoft announced a plan to acquire it for nearly $59 billion in January, days after Activision Blizzard announced lower-than-expected first-quarter earnings.
Microsoft stock, on the other hand, had its best day in two months after beating expectations with its own quarterly results.
Activision Blizzard shares closed at $76.10 per share, down 1.3%. That’s almost 20% less than Microsoft’s offer of $95 per share. The deal is expected to close before July 2023.
It would be the largest U.S. tech deal to date, but the growing delta suggests some investors are more concerned than ever that the deal could fail.
Activision Blizzard said Monday that its Activision arm, which brings out Call of Duty games, continued to lose monthly active users in the first quarter. Activision released Call of Duty: Vanguard in November, and the game didn’t receive generally positive reviews. The company’s net bookings fell nearly 29% in the quarter, in part due to lower premium sales for the new Call of Duty game.
Added to this is the regulatory scrutiny that Activision Blizzard was already confronted with.
“Activision Blizzard has received a voluntary disclosure request from the SEC and a subpoena from the DOJ grand jury, both of which appear to be related to their respective investigations into trading of securities by third parties — including individuals known to Activision Blizzard’s CEO — prior to the announcement of the… proposed transaction,” the company said in a regulatory filing dated March 15.
MoffettNathanson analyst Clay Griffin has a $95 target price on the stock, which is in line with the acquisition price.
“There’s always a non-zero chance that it will be blocked,” Griffin said. “Activision’s recent trading really shows people’s concerns about what happens in downside scenarios.”
Griffin said the weaker-than-expected Call of Duty numbers are bad for the underlying story behind Activision should the deal fall through. He expects the transaction to close, but said if Activision were forced to go it alone, the stock would likely be valued somewhere in the mid-’60s.
If the deal fails, it will be traded down,” he said. While the $3 billion separation fee would help “soften the blow,” Griffin said, “people are assessing where an independent Activision would trade if the deal didn’t go through.”
Of the 21 analysts who listed Activision Blizzard’s price targets on FactSet, 17 put them at $95.
— CNBC’s Ari Levy contributed to this report.
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