The outspoken investment group claims "Microsoft's offer fails to properly value Activision."
SOC Investment Group, a small group of Activision Blizzard shareholders, penned an open letter on Thursday morning calling on other Activision Blizzard shareholders to vote against the proposed merger with Microsoft, which will be voted on come April 28. The group gave two reasons for its opposition: it claimed the deal doesn’t accurately value the company, and also that the merger might not be viable “given the shift in the climate of antitrust enforcement.”
The group heavily criticized Microsoft’s $95 per share offer, and stated that the offer only appeared “to provide an ample premium” when compared to Activision Blizzard’s January share price. Extensive sexual harassment allegations leveraged towards the company in July 2021 saw the publisher’s share price dip heavily throughout the rest of the year,
The investment group claimed the valuation “failed to consider Activision’s share price performance during the first half of 2021,” which saw the company trade at an average price of $94.37 per share, and also boast a high closing price of $103.81--a per-share price greater than Microsoft’s offer.
SOC Investment Group blamed the decline in share price on Activision Blizzard’s board of directors, which the group decried as “ineffective” and “incompetent.” The group criticized the board’s silence in the face of both investigations and reports on the company’s sexual harassment scandal, and also claimed that board members failed to hold senior executives, namely CEO Bobby Kotick, responsible for the situation.
The group observed that various board members--specifically Robert Kelly, Reveta Bowers, and Casey Wasserman--have connections to Kotick outside of the company, and claimed those “employment and personal connections” could be one reason why the board has backed Kotick throughout the scandal, despite mass movements calling for his resignation.
One notable party that previously called for Kotick’s resignation was actually SOC Investment Group itself. In November 2021, the group penned a letter to the board, in which it challenged the board to not only terminate Kotick as CEO, but also to replace both the board’s chairman, as well as its lead independent director.
SOC also expressed concerns that the proposed merger could be viewed as “anti-competitive” by regulators, specifically due to the size and success of both Activision and Microsoft in the video game industry.
“Given that Microsoft both operates video game studios and maintains a dominant gaming platform, it is plausible that regulators will identify anti-competitive effects stemming from this merger and attempt to block it,” wrote the group. In January, Bloomberg reported that the deal would be reviewed by the Federal Trade Commission (FTC), which previously filed a lawsuit to block Nvidia’s acquisition of chip-manufacturer Arm in late 2021.
Activision Blizzard has not commented on the letter.
It will be interesting to see what effect--if any--SOC Investment Group’s letter has on the upcoming vote, as well as how much scrutiny the proposed deal will face by regulators. In other Activision Blizzard news, it was reported on Wednesday that California Governor Gavin Newsom allegedly meddled in the state’s lawsuit against the publisher, adding yet another wrinkle to the embattled company’s complex situation.
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