Activision Blizzard drops to lowest since Microsoft news

Activision Blizzard Inc. CEO Bobby Kotick walks the field after the morning session at the Allen & Co. conference in Sun Valley, Idaho, U.S., Thursday, July 13, 2017.

David Paul Morris | Bloomberg | Getty Images

Shares of games publisher Activision Blizzard fell Wednesday to their lowest price since Microsoft announced plans to acquire it for nearly $59 billion in January, days after Activision Blizzard released results below expectations in the first quarter.

Microsoft stock, meanwhile, had 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% less than Microsoft’s offer of $95 per share. The deal is expected to close before July 2023.

It would be the biggest U.S. tech deal to date, but the widening delta suggests some investors are more concerned than ever that the deal will fall through.

Activision Blizzard said Monday that its Activision arm that publishes 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 didn’t receive universally positive reviews. The company’s net bookings were down nearly 29% in the quarter, in part due to lower premium sales for the new Call of Duty game.

This is on top of the regulatory scrutiny Activision Blizzard was already facing.

“Activision Blizzard has received a voluntary request for information from the SEC and a grand jury subpoena from the DOJ, both of which appear to be related to their respective investigations into trading by third parties – including individuals known to the CEO of ‘Activision Blizzard – Securities Prior to the Announcement of the Proposed Transaction,’ the company said in an April 15 regulatory filing.

Clay Griffin, an analyst at MoffettNathanson, has a price target of $95 on the stock, matching the acquisition price.

“There’s still a non-zero probability that it’s blocked,” Griffin said. “Activision’s recent trading is really indicative of people’s concerns about what’s happening in downside scenarios.”

Griffin said weaker-than-expected numbers on Call of Duty would be bad for Activision’s fundamental story if the deal were to fall apart. He expects the deal to close, but said the stock would likely price somewhere in the mid-60s if Activision was forced to go it alone.

If the deal breaks, it’s going to drop,” he said. While the $3 billion severance fee would help “soften the blow,” Griffin said, “people are assessing where an independent Activision would negotiate if the agreement 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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