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Market Summary:
The major indices are all trading significantly higher at midday as stocks bounced back hard this morning following two clearly bearish days on Wall Street. Tech stocks and the Nasdaq have been leading the charge amid the continued volatility in the Treasury market, but the benchmark remains stuck below its 200-day moving average despite gaining nearly 2% in early trading. While most corporate earnings reports provided bullish surprises, including Union Pacific (UNP) and American Airlines (AAL), both American and United Airlines (UAL) warned about the impact of the Omicron wave, putting early pressure on the sector.
Microsoft to Acquire Activision Blizzard:
Microsoft has reportedly agreed to take out gaming giant Activision Blizzard (ATVI) in a $68.7 billion all-cash deal, marking Microsoft’s costliest acquisition in history and perhaps its most important in recent history. The proposed deal will see Microsoft pay $95/share, a 45% premium to the company’s stock price as it traded before the announcement. The acquisition comes after months of internal turmoil at Activision Blizzard. In July 2021, it faced allegations that the company allowed/condoned “frat boy culture” (female employees being subjected to sexual harassment). Some months later, in September 2021, it was amidst ongoing legal battles with state and federal regulators. While Activision Blizzard was shaken by these events since over a year but it had been ripe for takeout. However, there’s no guarantee this deal will close.
MSFT has spent the last few years stacking up gaming properties to build the foundation of its industry-leading Xbox Game Pass. With Microsoft’s acquisition of Zenimax Media last year, Xbox grew its game studio footprint to 23, putting Microsoft in a fundamentally different ballpark from its competitors. Microsoft’s commanding presence in the gaming industry leads to the possibility that this deal could be shot down by regulators.
Investors aren’t fully convinced this deal will go through as it is still trading well below Microsoft’s $95/share offering.
Profit Booking - SELL Recommendation:
After a careful assessment, we have decided to close our position in ATVI at a massive profit of 700%. Many Congratulations to our members who had the patience to hold their position alongside us.
Sell Pick No: 20
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