To The Moon

Time to pop the champagne and celebration EU’s approval in-principal granted to $Microsoft(MSFT)$ to acquire $Activision Blizzard(ATVI)$ ?

This is a major milestone, a major hurdle cleared (finally!) and in the process serves to possibly create the world’s largest gaming company.

Approval was received after Microsoft offered remedies in cloud gaming to address the antitrust concerns raised by EU regulators.

Unfortunately it is still not time yet:

• For celebration

• To buy Microsoft or Activision Blizzard stocks (immediately) yet.

Why?

Because it is not a done deal yet.

Merger between these 2 giants (in their own rights) is still facing challenges in both US & UK.

Regulators from both countries have blocked or sued to stop the merger over fears of:

• Reduced competition

• Reduced innovation in the Gaming industry.

What Does This Mean For Both Stocks?

Obviously, market reaction to the EU approval has been both “euphoric & amazing”.

Their stock prices have risen & fallen by +0.74% and -0.7%% on Tue, 16 May 2023. (due to jittery market sentiments).

Microsoft stock price - 16 May 2023

Activision Blizzard stock price - 16 May 2023

Already, analysts are forecasting & predicting that the deal would:

• Boost Microsoft's Gaming revenue.

• Diversify Microsoft’s portfolio of games.

• Benefit Activision Blizzard from Azure’s cloud and subscription services.

I think to be rational (investor) now would entails:

• Looking at the current “good” news squarely in the eye.

• Recognizing the “uncertainties” (more battles to fight!) over the regulatory outcome in other jurisdictions that could potentially limit the upsides for both stocks in the near term.

In The Longer Term?

Eventually when all approvals have been received, Microsoft and Activision Blizzard could create significant synergies in terms of:

• Cost savings.

• Cross-promotion and

• Innovation.

How?

1. Microsoft could leverage Activision Blizzard's popular franchises such as Call of Duty, Overwatch, and World of Warcraft to attract more users to its (a) Xbox and (b) cloud gaming platforms and maybe even (c) its Game Pass subscription service.

2. Activision Blizzard could gain access to Microsoft's Azure cloud infrastructure, artificial intelligence, and development tools to enhance its game quality and performance.

3. The combined company could invest more in developing new games and genres, as well as expanding into emerging markets eg. China, India, Latin America...

I do not think now is the time to buy into either Microsoft or Activision Blizzard.

Not yet, not until remaining approvals from both US & UK regulators have been received.

It just might be a long-drawn battle. Read below latest news!

Financial Times post dated 16 May 2023

Now, it’s about keeping tab of how Microsoft will go about re-engaging the other 2 regulators again.

Microsoft should leverage on its EU’s approval to continue the conversation, instead of reinventing the wheel again.

• Do you think Microsoft would be able to get the required remaining approvals?

• Do you think you would buy into Microsoft now or wait?

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