Activision Drops 10% As UK Blocks Microsoft Deal

Shares of Activision Blizzard (ATVI:US) are trading about 10% lower on Wednesday after Britain’s top competition body moved to block the landmark acquisition by Microsoft (MSFT:US).

The Competition and Markets Authority (CMA) released a final report on April 26, which says that the deal would reduce innovation and less choice for UK gamers over the years to come. Microsoft agreed to a $68.7 billion deal for Activision in January 2022.

“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,” said Martin Coleman, Chair of the independent panel of experts conducting this investigation.

The final decision comes despite positive early comments released by CMA in February. The regulator argues that Microsoft’s proposed solutions to mitigate the regulatory risks “had significant shortcomings and would require regulatory oversight by CMA.”

Activision and Microsoft said they will work together to appeal the decision. The deal has already faced a challenge from the U.S. Federal Trade Commission, while companies still await the approvals from European Commission and China.

Following the report, Activision shares dropped 10% to exchange hands below $79 a share. It means that the gap between the current market price and Microsoft’s $9 a share offer widened to over $16.

Today’s selloff complicates the pictures for arbitrage trades who were betting on Microsoft to be able to close the deal. Representatives Ro Khanna, Alan Lowenthal, Daniel Goldman, and Senator Tommy Tuberville all bought ATVI shares in the last 15 months.

On the other hand, Rep. Seth Moulton sold the ATVI stock on March 14, when the stock price closed at $79.09.