What happened
Despite a day of gains for the broader market, Activision Blizzard stock (ATVI) dipped in today's trading. The gaming publisher's share price fell roughly 1.5% on news that the Federal Trade Commission (FTC) will be challenging Microsoft's (MSFT 1.65%) buyout of the company in court. Meanwhile, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average indexes closed out the daily session up roughly 0.8%, 1.1%, and 0.6%, respectively.
In its recently published complaint against the proposed $68.7 billion buyout, the FTC alleged that allowing the deal to go through would hurt the competitive landscape in the video game industry and enable Microsoft to stifle its rivals in the space.The agency has filed a suit to block the deal in an administrative court, and developments on the regulatory front will likely continue to shape Activision Blizzard's stock performance in the near term.
So what
Activision Blizzard's valuation popped at the beginning of the year after Microsoft announced that it had agreed to buy the publisher for $95 per share. However, its stock has remained well below that level as the market has weighed the risks that the deal would be blocked by regulators.
While both Microsoft and Activision have indicated that they still expect the deal to go through, and that they believe they will win in court against the FTC, investors are remaining cautious.
Now what
With Activision Blizzard currently trading at about $75 per share, the stock would have roughly 27% upside if the deal with Microsoft winds up closing, but the challenge from the FTC complicates matters. Even if Microsoft and Activision Blizzard prevail in court against the agency, it will also need approval from regulators in the E.U. and U.K., and completion of the acquisition may take longer than the first-half-2023 window that the companies had been targeting.
