Despite ongoing uncertainty surrounding Microsoft’s proposed $69 billion acquisition of videogame giant Activision Blizzard, the Nasdaq 100 stock index has already made a move. Late on Wednesday, precisely at 9:46 p.m. Eastern time, NASDAQ announced that Activision (ticker: ATVI) will be removed from its Nasdaq 100 stock index on Monday, July 17, replacing it with the digital ad firm The Trade Desk (TTD).
However, the Nasdaq’s decision may appear slightly premature. This week, U.S. District Judge Jaqueline Scott Corley denied the Federal Trade Commission’s request to block the deal. In her ruling, Judge Scott stated that the FTC “has not shown it is likely to succeed” in its assertion that Microsoft will remove Activision’s popular Call of Duty games from Sony PlayStation or that the acquisition will significantly reduce competition in the videogame library subscription and cloud gaming markets.
Despite this ruling, the FTC filed an appeal on Thursday with the Ninth Circuit Court of Appeals in San Francisco to overturn the lower court order.
The Potential Implications of Microsoft’s Acquisition of Activision
The Federal Trade Commission (FTC) has filed a court document expressing concerns over the lack of a preliminary injunction in the case of Microsoft’s proposed acquisition of Activision. The FTC warns that without an injunction, both companies may freely share confidential business information and engage in long-term strategic planning, potentially leading to the exclusive distribution of Activision content by Microsoft.
The deadline for Microsoft’s acquisition of Activision is set for Tuesday, July 18. However, Nasdaq has recently made a decision to remove Activision from its index. This move reflects Nasdaq’s commitment to abide by its own guidelines for constructing the index. According to these guidelines, when mergers or acquisitions occur, the removal of an index issuer or security should take place as soon as completion of the transaction is highly probable. Therefore, Nasdaq likely based its selection of July 17 as the target date for index removal on the anticipated closure date of July 18.
Despite the impending deadline, traders remain cautious regarding potential delays or disruptions to the deal. This caution is evident in the closing price of Activision shares on Thursday, which stood at $89.54, $5.46 below the target price of $95. This means that if the deal does indeed close early next week, investors could potentially achieve a 6% return, which would be considered favorable.
In summary, while Microsoft’s acquisition of Activision approaches its deadline, concerns from the FTC and traders’ wariness highlight the potential risks that could still impact the deal. It remains to be seen whether any delays or disruptions will arise.