Shares of game publisher Activision Blizzard on Wednesday fell to their lowest price since Microsoft announced a plan to acquire it for almost $59 billion in January, days after Activision Blizzard issued lower-than-expected first-quarter earnings.
Microsoft stock, meanwhile, enjoyed its best day in two months after beating expectations with its own quarterly results.
Activision Blizzard stock closed at $76.10 per share, down 1.3%. That’s almost 20% lower than Microsoft’s bid of $95 per share. The deal is expected to close before July 2023.
It would be the largest U.S. technology transaction to date, but the widening delta suggests some investors are more fearful than ever that the deal will fall through.
Activision Blizzard said on Monday that its Activision branch that releases Call of Duty games continued to lose monthly active users in the first quarter. Activision released Call of Duty: Vanguard in November, and the game did not receive universally positive reviews. The company’s net bookings declined almost 29% in the quarter, in part because of lower premium sales for the new Call of Duty game.
That’s on top of regulatory scrutiny Activision Blizzard was already facing.
“Activision Blizzard received a voluntary request for information from the SEC and a grand jury subpoena from the DOJ, both of which appear to relate to their respective investigations into trading by third parties – including persons known to Activision Blizzard’s CEO – in securities prior to the announcement of the proposed transaction,” the company said in a regulatory filing on April 15.
Clay Griffin, an analyst at MoffettNathanson, has a $95 price target on the stock, matching the acquisition price.
“There’s always a non-zero probability that it does get blocked,” Griffin said. “The recent trading of Activision is really indicative of people’s concerns of what happens in downside scenarios.”
Griffin said the weaker-than-expected numbers on Call of Duty are bad for the fundamental story behind Activision should the deal collapse. He expects the transaction to close, but said the stock would probably be valued somewhere in the mid-60s if Activision were forced to go it alone.
If the deal breaks, it’s going to trade down,” he said. While the $3 billion breakup fee would help “soften the blow,” Griffin said, “people are assessing where an independent Activision would trade in the instance the deal was not approved.”
Of the 21 analysts who have Activision Blizzard price targets listed on FactSet, 17 are at $95.
— CNBC’s Ari Levy contributed to this report.
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