The Ratings Game: Activison stock upgraded on ‘increasingly compelling’ merger-arbitrage opportunity

by | Jul 25, 2022 | Stock Market

Activision Blizzard Inc. shares trade about 17% below Microsoft Corp.’s agreed-upon takeover price for the company amid concerns that regulators could block the combination, but one analyst sees opportunity in that spread. MoffettNathanson’s Clay Griffin upgraded Activision’s stock to outperform from market perform Monday, writing of merger-arbitrage potential related to the deal. While Griffin doesn’t necessarily think that the merger will close immediately, he does eventually believe that the deal will go through.

The Microsoft-Activision deal still faces its share of regulatory hurdles ahead, and Griffin said there’s some confusion about what the timeline might look like. Activision’s stock
slipped 0.2% in morning trading Monday, to trade 16.8% below the $95/share deal price. Activision disclosed in March that it and Microsoft
received so-called Second Requests for information from the Federal Trade Commission concerning the deal. The company explained that the Second Request extends the waiting period for 30 days after the companies substantially comply with the request, unless the FTC terminates that waiting period earlier. Griffin noted a recent industry article from Gamespot said that Microsoft has provided the required information, and that while it was unclear whether or not Activision had, the FTC would have 30 days to decide whether or not to challenge the deal. But Griffin isn’t so sure the timeline would be that quick. “[T]he FTC isn’t bound by some ‘use it or lose it’ ability to challenge,” he wrote. Microsoft and Activision could close their deal after the 30-day window pa …

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