This is significant...
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Usually this signals a change in structure, divestiture, or a decoupling (Microsoft) from a previous agreement. I don't think Activision looses COD under any circumstance. Things are about to get spicy regardless.
If the Microsoft deal fails there's two ways this plays out:
- Activist investors group together, buy as much stock as they can in order to buy a seat at the table and tell Kotick what to do.
- Or activist investors group together, short stock, stock price goes down, low price make Kotick cry, activist investors tell Kotick do what I say or price stay low.
Morgan Stanley are being hired in this scenario to act as protection/deterrent for both possible scenarios.
Gonna add to this, as I had to go through a billion (s) dollar merger for work back in 2021 (not in gaming, although I have worked with Bethesda on some of their upcoming games since).
I'll start with my opinion: this is the first public indication by ATVI that they are anticipating the deal will fall through. As ive said prior, M&A purchasing agreements come saddled with good faith clauses - hiring Morgan Stanley as Activism Defense indicates they are planning on safeguards should the current board remain in charge. This isn't the thing you would do if you think you're about to get bought.
As GHG said, you normally do this cause you know some group or groups within your investors might begin or have incentive to band together and work against the current executive board. When M&A deals like this fall through, in the event that the company being purchased is also a publicly traded group, they are going to take a hit on the stock price. In traditional deals, when a purchasing agreement is signed, the stock of the company will normally trade near or around the agreed purchasing stock price - that has never been the case with ATVI, which is being bought for about $96 a share (been trading in the $70s on average since last Jan. When the deal was announced). This is notable because anyone who is holding ATVI right now is hoping that they will get a $20+ per share bonus on their positions once MS completes the purchase.
Last week, one of the reasons Pachter and other funds/groups who are currently holding ATVI positions started making up pure FUD after the CMA PF came out is because the have positions which will devalue should the deal not go through, or current stockholders start selling their positions.
With the deal now being severely threatened, we now enter a position where ATVI has to plan for the contingency that they are gonna have a lot of pissed off stock holders who bought into ATVI for over a year, expecting to get paid out at $96 when they came in in the $70s. When this deal falls through, ATVI leadership is gonna get $2-$3b from MS, and that is loads of money that an Activist Group could rightfully demand get paid out to all stock holders, either in the form of Dividends or inflating the stock price to be higher with stock buy backs, or demand that the current executive management step down, or a combination of all these factors.
Interesting times ahead. Given MS' silence and now this, we are probably nearing the endgame
www.wsj.com
news.xbox.com
