Activision Blizzard (NASDAQ:ATVI) stock is up nearly 3% today on news that legendary investor Warren Buffett has increased his stake in the video game maker.
News broke over the weekend that Buffett’s holding company, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), has increased its stake in Activision Blizzard. It now owns 9.5% of the company’s stock.
The increased stake comes ahead of Microsoft’s (NASDAQ:MSFT) proposed $68.7 billion acquisition of Activision Blizzard. Essentially, Buffett has been buying more ATVI stock because he is betting that the Microsoft acquisition will clear all the needed regulatory hurdles and ultimately be approved.
What Happened With ATVI Stock
In January, Microsoft announced its plan to buy Activision Blizzard for $95 a share. However, ATVI stock finished trading last week at $75.60. That means there is currently a 26% premium on ATVI stock. Therefore, Buffett has been buying Activision Blizzard stock at current levels on the assumption he will get to tender his shares at $95. The companies expect the deal to close in fiscal 2023.
“If the deal goes through, we make some money, and if the deal doesn’t go through, who knows what happens,” Buffett said at his annual meeting of Berkshire Hathaway shareholders over the weekend.
Importantly, Berkshire purchased $1 billion of ATVI stock in the fourth quarter of 2021. This has prompted some speculation that Buffett was in on Microsoft’s plans. However, he has since said that Berkshire “had no prior knowledge” of Microsoft’s plan to buy the company.
Why It Matters
Investors large and small closely follow Warren Buffett’s stock purchases. Many investors try to replicate the stock holdings in Berkshire Hathaway’s portfolio, which is publicly available. His largest holdings include Apple (NASDAQ:AAPL), Coca-Cola (NYSE:KO) and American Express (NYSE:AXP).
So far this year, BRK-B stock is up 7.5% , compared to a near-14% decline in the benchmark S&P 500. Buffett’s bet that Microsoft’s acquisition of Activision Blizzard will receive regulatory approval is seen as a big vote of confidence in the deal and has other investors piling into the stock today.
What’s Next for Activision Blizzard
ATVI stock moves higher today on news that Warren Buffett has continued to buy shares of the video game maker. While positive, Microsoft’s takeover of the company behind hit video game titles such as Call of Duty and World of Warcraft still needs to receive the required regulatory approvals and is not a foregone conclusion.
Time will tell if Microsoft seals the deal and Buffett’s latest bet pays off.
On the date of publication, Joel Baglole held a long position in MSFT and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
