Wouldn't the stock prices plummet if the deal doesn't go through, because the assumption is the price is higher due to the acquisition getting closer and closer? I mean, that is my assumption based off the fact it was lower before the initial purchase, rose a bit after and has sat relatively at the same point for some time.
Well here's my flippant analysis - I haven't looked at ATVI's actual financials to arrive at a conclusion on where their share price would be outwith the acquisition - this is more finger in the air stuff.
With that in mind, back towards the end of 2021 before the merger was announced, ATVI was riding quite high - above $100.
But the combination of the smell around the allegations of misconduct and misogyny by ATVI staff which Bobby had failed to address, coupled with the crashing tech market, caused their share price to tank all the way into the $50 range before settling around $60 when the acquisition was announced.
Since then the price has hovered at various levels below $95. But here's the thing - ATVI is not currently a viable investment because there is no growth potential.
MS has the purchase option at $95 - as long as that option is valid the price will not exceed $95 (except potentially if people believe the deal is about to be cancelled - that could lead to the price exceeding $95). It is effectively capped no matter what ATVI does prior to the transaction concluding now.
So the question is what would happen to the ATVI stock price if that $95 cap was removed by cancelling the acquisition?
Here we'd need to look at earnings and consider any other relevant information.
For example
1) The investigation into Bobby has been settled. In legal terms at least, the misconduct and misogyny allegations are dealt with.
2) Diablo 4 just successfully launched and ATVI will presumably present strong earnings on the back of that in the next few weeks. I'd ordinarily expect a price spike as a result.
3) The stock market has turned around and is in a growth spurt again. A rising tide lifts all ships.
So given the above relevant changes the question becomes - what would ATVI's share price be today but for the acquisition? And to understand that we need to consider whether ATVI is a wise investment with growth potential.
We accept that MS bought ATVI at a low point on the stock price - personally I believe that if this acquisition is cancelled, ATVI suffers a short term sell off by those who just wanted to cash in on risk free money and panic, but swiftly swings north and heads back above $100.
In fact, if the acquisition does fall through I think I'd break my personal rule about avoiding gaming companies, and invest in some ATVI shares because I think they'll come back stronger over the next few years. I think the $95 transaction point is artificially holding ATVI shares down right now.
