18 January 2022: Microsoft bids for Activision Blizzard
Microsoft agreed to buy Activision Blizzard, maker of Call of Duty and Candy Crush, for $68.7 billion in cash, its largest acquisition ever. Activision shares jumped toward the $95 offer price but stayed below it for months as regulators on several continents questioned the deal. It finally closed in October 2023. Merger arbitrage, the art of betting that a deal will close, proved to be a test of patience.
The lesson: The gap between a deal price and a market price is the market's estimate of what could go wrong.
What it meant for investors
$1,000 in Activision Blizzard at the start of 2020 → $1,583 today, vs $2,092 in the S&P 500.
We start the clock at the start of 2020, the latest year on the wheel. That is 1.6 times the money, but $509 less than a plain index fund made over the same years.
What Activision Blizzard teaches: A takeover bid can rescue a damaged stock, but merger arbitrage carries regulatory risk; Activision holders spent almost two years unsure whether 95 dollars would arrive.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2015 | $20.00 | $4,750 | $3,301 |
| 2018 | $63.00 | $1,508 | $2,519 |
| 2020 | $60.00 | $1,583 | $2,092 |
green = beat the S&P 500 · red = lost money
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Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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