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So basically, Microsoft has offered to buyout Activision Blizzard (ATVI) for 95$ a share, due closing sometime early next year. If you look at the price of the stock right now, it's 77$ a share... Because the market anticipates heavy FTC antitrust involvement that could end up botching the deal. If you know anything about video games, game pass, xbox, and the games activision makes vs the competition from Tencent, Sony, and Nintendo, you would know that this acquisition would not even closely give MSFT a monopoly in the video game space.
I was still skeptical because why would the market be discounting this deal so heavily, most acquisition announcements make the stock trade very close to the offered price.. but this weekend it was announced the GOAT of investing, Warren Buffet, now owns $7 billion or 10% of the company, which implies that even he believes this deal will go through in a merger arbitrage bet. So if you don't want to take it from me, take it from the Gandy of stocks.
You can buy the stock straight up and earn 20% ish in a year, which offers far far more than any mutual fund or safe investment could net, or you can buy the call options expiring next year:
At the money options are going for 7.50 right now, which also implies the market isn't fully pricing in the acquiring price. If ATVI gets bought out at 95$ a share, that price should be 18$ right now, or a 150% return. You can buy up to a 90 strike and earn upwards of the 200% implied return should the gap close.
Hedge downside with whatever collar or spread suits your risk appetite.
Tagging the one or two guys here who know this stuff for thoughts @Amnesia @averagejoe
I was still skeptical because why would the market be discounting this deal so heavily, most acquisition announcements make the stock trade very close to the offered price.. but this weekend it was announced the GOAT of investing, Warren Buffet, now owns $7 billion or 10% of the company, which implies that even he believes this deal will go through in a merger arbitrage bet. So if you don't want to take it from me, take it from the Gandy of stocks.
You can buy the stock straight up and earn 20% ish in a year, which offers far far more than any mutual fund or safe investment could net, or you can buy the call options expiring next year:
At the money options are going for 7.50 right now, which also implies the market isn't fully pricing in the acquiring price. If ATVI gets bought out at 95$ a share, that price should be 18$ right now, or a 150% return. You can buy up to a 90 strike and earn upwards of the 200% implied return should the gap close.
Hedge downside with whatever collar or spread suits your risk appetite. Tagging the one or two guys here who know this stuff for thoughts @Amnesia @averagejoe
