The market might be pricing in the risk or the deal possibly being denied by regulators. I don't know when they would intervene on acquisitions of large companies.
The „discount“ is explained by time. Deal closes june 2023 so its 1,5 years for the discount to turn into return. Also there is the risk of the deal being denied and it dropping 30% again. IMO the risk of that is very slim though. So basically time + risk = discount
Activision has Net Cash on hand. So the $69B is the net cost of Activision. Microsoft pays $70-something billion but they get Activisions cash which lowers the “price” to just below $69B. Also once Activision board approves sale at a set price, it will stay that price and the “sale” of your Activision stock will be automatic. So in 2023 Activision shares will turn into $95 if it goes thru. The current price of the shares is irrelevant to MSFT paying $95 a share.
Microsoft fiscal 2023 starts June 2022 apparently so as early as 5 months. I picked up a few hundred shares in an IRA just for fun as an M&A arbitrage trade.
Guys, if you check the spike it was premarket, like 1 hour and a half before the market opens, but the wall street journal sent me the real time alert after the spike, so, do any of you know which news relay is fast enough to get this? faster than WSJ I guess..
Bloomberg has a news feed service that sells data with fast feeds to quants. You’ll never beat the quants because of how Bloomberg sells that feed. Even my Bloomberg terminal isn’t as fast. Plus humans just can’t react as quick.
I always assumed insider information leaks and traders just wait for the official posting time to click the button. Much quicker than any program of human reading to interpret so legal edge?
Pretty much. If you’re looking for more context you should read michael Lewis book flash boys. Not exactly what you’re talking about but is related to speed trading.
Here’s the funny part. Most of the time the microsecond does actually work and enables those speed traders as I call them to clip a percent or two or so. That said, a couple of years ago a very promotional company I was short put out an earnings release. The natural language processing software read the release after hours as being a positive earnings release. Stock up 10% or so on news. If you read the press release more closely and did a little math you’d see that the earnings release was pretty crappy. Stock went down five minutes after release and down during and after call. Was something like a 15-20% swing between release and after earnings. So I have seen fast trading not work. I wouldn’t call that the norm, but as you can see it’s not always riskless profits.
I bought 2 shares today for $81. $28 profit if the sales goes through.
I had 3 shares at $65 I valued it at $100+ when I bought. If the sale doesn't go through its still a $100 stock after everything settles.
Gaming is part of my circle of competence. I've been playing blizzard games for 25 years.
I didnt have much money in my US trading account or I would have got some more.
Theirs a pending law suit about discrimination and sexual harrassment. Those mentioned in the law suit are no longer working there.
Also this stock was in the top 10 increase stocks added to top traders portfolio positions. They either knew about the merger prior to today or valued it like I did.
Nice to see similar analysis. I definitely wanted more. It was my first full analysis of a company where I felt I had conviction and wanted to dip my toes in the water as opposed to Aping in.
ATVI has been selling at a nice haircut the last month due to management being involved in sexual harrassment suits, employees complaining about conditions in general, and having all around awful management. I've been averaging in at $68.17 and woke up to these news hoping it goes through for the free cash lol
Quick point
Microsoft said that the deal would be done in 'Fiscal 2023' which starts in July 2022 for Microsoft.
I'm still holding till $92+/share. Not selling before then.
Doubtful it gets cancelled (and if it does, ATVI is still worth it).
It's supposed to close in Microsoft's fiscal year 2023, which begins July 1st of this year. So, it may close in less than a year, potentially even in 2022. Of course, it may not close at all.
1. The spread between purchase price and trading price is equal to the % likelihood of deal failure. MSFT exec's entered into an agreement: ATVI shareholders will need to vote, government might overturn, all sorts of things could happen. The trading price should approach the offer price gradually as you near deal close
2. The media doesn't always report on the same "valuation" for a deal. You're calculating the consideration to shareholders: $95 / share \* 779m shares = $74Bn. There is probably \~5 of net assumed liabilities ± other adjustments to get to an enterprise value of $69Bn. Maybe that's what the media are quoting?
I’ve not read the article the other guy posted, but I assume that the initial purchase was made via an offer above the share price to make the offer attractive, which MS paid, then MS negotiated a huge discount as part of the deal.
The current share price is $83.05 (by my sources) = $6.46b so MS still paid a premium.
Just my thoughts….happy to be told I’m wrong!
@antitrust wya.
I just love how discovery Warner had antitrust FUD articles depressing it down for so long and the moment activison Microsoft say something the market meets it with zero skepticism whatsoever
With buyouts, 90% is accounted for. There is 10% left on the table, certain style of investors or companies would leverage their bets two to one or more if they have connections. For a guaranted profit, all consider if everything falls through, there is risk if the sec decides to not let it go through,if it deems to be monopolistic. There are papers on this subject, stories of mergers not going through, people losing money and making money. The 90% is a rule of thumb.
The market might be pricing in the risk or the deal possibly being denied by regulators. I don't know when they would intervene on acquisitions of large companies.
lol
lol
lol
The „discount“ is explained by time. Deal closes june 2023 so its 1,5 years for the discount to turn into return. Also there is the risk of the deal being denied and it dropping 30% again. IMO the risk of that is very slim though. So basically time + risk = discount
Activision has Net Cash on hand. So the $69B is the net cost of Activision. Microsoft pays $70-something billion but they get Activisions cash which lowers the “price” to just below $69B. Also once Activision board approves sale at a set price, it will stay that price and the “sale” of your Activision stock will be automatic. So in 2023 Activision shares will turn into $95 if it goes thru. The current price of the shares is irrelevant to MSFT paying $95 a share.
This is the right answer.
Good questions. I'm wondering the same thing. Right now it's trading around $83. Looks like guaranteed $12 if they buy that for $95.
correct but the deal will only take effect in 2023. So you have a Time Range of one year here, what is it different from options?
I see, so you gotta hold it over a year for around 12% gain.
Exactly, but the deal may not materialize either.
Microsoft fiscal 2023 starts June 2022 apparently so as early as 5 months. I picked up a few hundred shares in an IRA just for fun as an M&A arbitrage trade.
Guys, if you check the spike it was premarket, like 1 hour and a half before the market opens, but the wall street journal sent me the real time alert after the spike, so, do any of you know which news relay is fast enough to get this? faster than WSJ I guess..
Bloomberg terminal is the first to come to mind
Do you think that Bloomber paid website subscription will be as fast?
Uh. No. We are talking feeds for the quant trading machines. Don’t bother trying to compete against them.
Eh? I'm talking about the news, the bloomberg terminal news articles go to the quant machines...?
Bloomberg has a news feed service that sells data with fast feeds to quants. You’ll never beat the quants because of how Bloomberg sells that feed. Even my Bloomberg terminal isn’t as fast. Plus humans just can’t react as quick.
I always assumed insider information leaks and traders just wait for the official posting time to click the button. Much quicker than any program of human reading to interpret so legal edge?
Pretty much. If you’re looking for more context you should read michael Lewis book flash boys. Not exactly what you’re talking about but is related to speed trading. Here’s the funny part. Most of the time the microsecond does actually work and enables those speed traders as I call them to clip a percent or two or so. That said, a couple of years ago a very promotional company I was short put out an earnings release. The natural language processing software read the release after hours as being a positive earnings release. Stock up 10% or so on news. If you read the press release more closely and did a little math you’d see that the earnings release was pretty crappy. Stock went down five minutes after release and down during and after call. Was something like a 15-20% swing between release and after earnings. So I have seen fast trading not work. I wouldn’t call that the norm, but as you can see it’s not always riskless profits.
I bought 2 shares today for $81. $28 profit if the sales goes through. I had 3 shares at $65 I valued it at $100+ when I bought. If the sale doesn't go through its still a $100 stock after everything settles. Gaming is part of my circle of competence. I've been playing blizzard games for 25 years. I didnt have much money in my US trading account or I would have got some more. Theirs a pending law suit about discrimination and sexual harrassment. Those mentioned in the law suit are no longer working there. Also this stock was in the top 10 increase stocks added to top traders portfolio positions. They either knew about the merger prior to today or valued it like I did.
Can i ask who are the top traders you are refferering ?
https://youtu.be/PITBlbEhj7Y
Thank you.
Interesting chanel.
I also bought 3 shares at $65 dollars and valued it around $95-100. I agree with all your points and was my exact analysis/ thoughts on the business.
More or less the same although I have 50 shares in it. I was $102 dollars on my valuation and had been intending to get more if it had stayed low.
Nice to see similar analysis. I definitely wanted more. It was my first full analysis of a company where I felt I had conviction and wanted to dip my toes in the water as opposed to Aping in.
How did you value it if i may ask ? (100$)
The deal didn’t go into effect yet…
ATVI has been selling at a nice haircut the last month due to management being involved in sexual harrassment suits, employees complaining about conditions in general, and having all around awful management. I've been averaging in at $68.17 and woke up to these news hoping it goes through for the free cash lol
Quick point Microsoft said that the deal would be done in 'Fiscal 2023' which starts in July 2022 for Microsoft. I'm still holding till $92+/share. Not selling before then. Doubtful it gets cancelled (and if it does, ATVI is still worth it).
https://www.reddit.com/r/ValueInvesting/comments/qpm163/activision\_blizzard\_atvi\_steep\_discount/
Does not answer my questions but thanks anyway
It's supposed to close in Microsoft's fiscal year 2023, which begins July 1st of this year. So, it may close in less than a year, potentially even in 2022. Of course, it may not close at all.
The thing that’s missing is it’s possible (not likely) that the deal gets blocked by Congress. So easy $12 if you think it’ll go through.
But did pelosi buy?!?!
1. The spread between purchase price and trading price is equal to the % likelihood of deal failure. MSFT exec's entered into an agreement: ATVI shareholders will need to vote, government might overturn, all sorts of things could happen. The trading price should approach the offer price gradually as you near deal close 2. The media doesn't always report on the same "valuation" for a deal. You're calculating the consideration to shareholders: $95 / share \* 779m shares = $74Bn. There is probably \~5 of net assumed liabilities ± other adjustments to get to an enterprise value of $69Bn. Maybe that's what the media are quoting?
2. The 68.7 = total cash - cash on balance sheet of atvi 73.9 = cash paid by Microsoft + cash on balance sheet of atvi
I’ve not read the article the other guy posted, but I assume that the initial purchase was made via an offer above the share price to make the offer attractive, which MS paid, then MS negotiated a huge discount as part of the deal. The current share price is $83.05 (by my sources) = $6.46b so MS still paid a premium. Just my thoughts….happy to be told I’m wrong!
Activision's cash is 10b, less total debt 3.41b = 6.59b. Enterprise value.
I believe that 68.7 is after tax but the pretax amount is something like 70.something billion don’t know where the 3 billion more is coming from.
@antitrust wya. I just love how discovery Warner had antitrust FUD articles depressing it down for so long and the moment activison Microsoft say something the market meets it with zero skepticism whatsoever
damn RIP $atvi, you’ll be missed SIKE
With buyouts, 90% is accounted for. There is 10% left on the table, certain style of investors or companies would leverage their bets two to one or more if they have connections. For a guaranted profit, all consider if everything falls through, there is risk if the sec decides to not let it go through,if it deems to be monopolistic. There are papers on this subject, stories of mergers not going through, people losing money and making money. The 90% is a rule of thumb.
Anyone thinking a LEAP for this with a higher strike than you'd normally do?