A look back at Activision Blizzard Inc.
A look back at Activision Blizzard Inc.
The arbitrage opportunity has closed
The Activision ATVI 0.00%↑ arbitrage opportunity we discussed last time has closed, with the company no longer trading following its acquisition by Microsoft MSFT 0.00%↑.
With that done, I thought it was time for a review of my initial analysis and see what happened:
The Thesis
The first thing we need to take into consideration is to see what I thought about the company, and what my thesis for the investment was:
Activision Blizzard is a growing company with consistent profits
The company consistently returns capital to shareholders
The management team has made some major errors and needs to go
Some of their PR recently has been questionable
The Microsoft merger provides a potentially attractive return in the near future with a clear end state
Even if the merger falls through, I would still own a decent company with limited downside
How has this held up?
Let’s take it point by point:
Activision Blizzard is a growing company with consistent profits
The profits remained consistent, however net revenues have decreased in the past year, likely off the back of the poorly received games.
The company consistently returns capital to shareholders
The company has continued paying dividends, up until the moment it was acquired.
The management team has made some major errors and needs to go
Fortunately Microsoft has recognized this issue, and Bobby Kotick is set to leave in December, giving enough time for a smooth transition.
With luck, Microsoft will rub off on Activision Blizzard and fix some of the culture issues they have been getting criticized over.
Some of their PR recently has been questionable
This has continued, though they have been trying to fix it.
The Microsoft merger provides a potentially attractive return in the near future with a clear end state
And it has done so!
While there were a few issues and objections to the merger, ultimately the merger occurred and shareholder were rewarded with $95 per share, a 25% return since i first reviewed the business.
Even if the merger falls through, I would still own a decent company with limited downside
It didn’t fall though, but it’s still a decent company.
The future
I’m a bit unhappy that I didn’t go in on the play, but at the same time, hindsight is 20/20.
I can’t see the future, so it’s normal for me to lose out on some deals.
At the end of the day though, this was a classic arbitrage opportunity and worked out quite well to investors.
Congratulations!