What happened

Over the Thanksgiving break, while markets were closed for trading, Politico reported that the Federal Trade Commission (FTC) "is likely to file an antitrust lawsuit to block Microsoft's $69 billion takeover of video game giant Activision Blizzard." On Friday morning, as trading resumed after the holiday, Activision Blizzard (ATVI) stock tumbled in response.  

As of 10:30 a.m. ET, Activision stock is down 4.1%.

So what

Mind you, "is likely to file" is not the same thing as "will file" -- or "will succeed in blocking the merger," for that matter. Politico goes on to explain that the FTC commissioners have not yet made a decision to sue Microsoft (MSFT 0.34%) to block its acquisition of Activision.

That being said, according to Politico, the investigation in this case is already well advanced and a lawsuit -- if one is filed -- could arrive as early as next month. And the FTC is reportedly concerned that allowing Microsoft to bring Activision in house could not only bolster Xbox's No. 3 position in the video game console market, but also enable the tech powerhouse to bring popular Activision games such as Call of Duty in house -- preventing Sony and Playstation from selling the game -- a pretty clear anticompetitive move, if it's what Microsoft is contemplating.

Now what

Microsoft, for its part, has repeatedly assured the FTC that it is contemplating no such move -- but plans can change. And just because Microsoft might not make Call of Duty Xbox-exclusive, that doesn't necessarily mean that it won't keep new hit Activision video games exclusive to Xbox.

As of today, there are really two likely ways this situation could go. One, the FTC could sue and prevent Microsoft from buying Activision. (Sure, the FTC could also lose, but it's best not to bet against the government.) An FTC win would presumably hurt Activision's value (currently $57.5 billion), and with that valuation representing a hefty 36 times trailing earnings, it's likely Activision's stock price would tumble on a successful FTC lawsuit.

Or two, the FTC could require ironclad guarantees from Microsoft not to act in an anticompetitive manner after acquiring Activision, permitting the merger to proceed. In that case, it doesn't matter so much whether Activision stock is overpriced. So long as Microsoft remains happy to pay a premium, investors would reap the 20% difference between the $69 billion Microsoft has offered to pay for Activision, and the company's current $57.5 billion price.

Whether you should buy Activision stock today depends largely on which of these two outcomes you think most likely.