Today brings the news of the biggest deal of 2022 so far. Tech giant Microsoft (NASDAQ:MSFT) has announced plans to acquire Activision Blizzard (NASDAQ:ATVI), a company that has dominated the video game space for years. The Wall Street Journal reports that the companies have agreed to an all-cash deal worth $68.7 billion, sending Activision Blizzard stock shooting up. This acquisition will make Microsoft not only the world’s third-largest video game producer by revenue, but also the largest in the U.S. Microsoft has been on a buying spree throughout the previous year, making clear moves to dominate the gaming space. The acquisition of Activision, though, will likely be what skyrockets the company to the top of the industry.
As a result of this deal, Activision Blizzard stock has been rising all morning. Shares have shot up by more than 30% within the first hour of trading. And they show no signs of slowing down. Since the year began, ATVI has mostly flatlined. Up until today, Activision Blizzard stock hasn’t seen much growth this week. And while MSFT stock has declined slightly today, that is largely attributable to market forces.
Joining forces promises to yield excellent results for both companies. While Activision has drawn controversy in recent months due to gender bias and sexual harassment accusations in the workplace, that obviously hasn’t diminished the company’s potential in the eyes of Microsoft. Let’s take a closer look at what this deal means for both companies.
What to Know About the Microsoft and Activision Blizzard Stock Deal
- More than anything, this deal should be seen as a key metaverse play for Microsoft. Microsoft CEO Satya Nadella states that gaming “will play a key role in the development of metaverse platforms.” He adds that the company is “investing deeply in world-class content, community and the cloud.”
- Activision has produced many of the most popular video games of the past decade. Some noteworthy franchises include Call of Duty, Guitar Hero and World of Warcraft. Additionally, the company’s holdings are vast, spanning mobile, PC and cloud gaming.
- The only two larger video game producers by revenue are China’s Tencent Holdings (OTCMKTS:TCEHY) and Japan’s Sony Group (NYSE:SONY).
- Wall Street is reacting favorably to the news of the acquisition. Kirk Matrene of Evercore ISI notes that acquiring Activision Blizzard will help launch Microsoft to the front of the gaming world “in terms of having the requisite cloud infrastructure to support new gaming paradigms.”
- For the third quarter of 2021, Activision Blizzard reported 390 million monthly active users. This is likely to provide an excellent boon to Microsoft. The tech giant plans to offer its new holding’s games through its Game Pass subscription package.
- Activision Blizzard CEO Bobby Kotick will remain in his current role despite the company’s recent controversy. After the deal has been finalized, the entire company will report to Microsoft Gaming CEO Phil Spencer. Spencer states that the company’s “vision of the metaverse is based on intersecting global communities rooted in strong franchises.”
- Although trading of Activision Blizzard stock was briefly halted due to news of the acquisition, today’s patterns indicate that the road ahead will be smooth for investors. Any investors who have written ATVI off among video game stocks should reconsider.
- Pending no further regulatory complications or shareholder objections, the merger should officially close in 2023. Investors should keep watching Activision Blizzard stock as the merger moves closer to finalization.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.