Activision Blizzard Shares Plunged 11.5% As UK CMA Blocks Deal

The Activision Blizzard Inc (NASDAQ: ATVI) share price plunged 11.45% after the UK Competition and Markets Authority (CMA) blocked its $69 billion takeover by Microsoft because Microsoft “failed to effectively address the concerns in the cloud gaming sector.”

The decision shocked many as it was a significant setback for the deal, which would have been the most significant consumer tech deal since AOL bought Time Warner 20 years ago. While the two companies could appeal the decision, they would likely spend years trying to undo the CMA’s decision in court.

The UK CMA’s decision to block the deal on antitrust grounds has bolstered efforts to regulate big tech companies such as Apple, Amazon, Microsoft, Google and Meta. However, the efforts to curtail the anti-competitive behaviours by the large tech companies that can easily acquire other firms have been failing due to recent court losses. 

The US Federal Trade Commission (FTC) to stop the deal had been challenged in court, and there was no guarantee that the FTC would have the legal capacity to block the deal. However, the UK’s CMA has significant power over such acquisitions, and its decision is binding globally, which means the deal is likely dead. 

Microsoft has said that it will appeal the decision, but an appeal could take years to be resolved, yet the deal’s final deadline of July 18, 2023, is fast approaching. Activision could receive a breakup fee of $3 billion if the deal is scrapped. 

Brad Smith, Microsoft’s president, said: “We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.” 

Bobby Kotick, Activision’s CEO, said: “If the C.M.A.’s decision holds, it would stifle investment, competition and job creation throughout the U.K. gaming industry,” 

While Activision Blizzard’s stock fell after news of the CMA’s decision, the Microsoft share price rose 7% as investors cheered the news. The markets seem to believe that Microsoft’s acquisition of Activision Blizzard may drag the tech giant’s performance. 

*This is not investment advice. 

Activision Blizzard's (ATVI) share price. 

The Activision Blizzard share price plunged 11.45% after the UK regulator blocked the company’s acquisition by Microsoft.