Activision's market value is still 14% below what Microsoft plans to pay for it — and that suggests investors don't think the deal will get done

• Activision Blizzard is trading 14% below the price Microsoft agreed to acquire it for on Tuesday.
• The wide spread suggests investors don't have confidence the deal will be completed smoothly.
• Microsoft's proposed $69 billion acquisition would make it the largest tech deal ever amid a period of heightened regulatory scrutiny. 
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Investors may be having some doubts about Microsoft's proposed $69 billion acquisition of Activision Blizzard based on Tuesday's trade.

Activision Blizzard shares hovered around $82 on Tuesday, about 14% below the proposed takeover at $95 per share. The 14% spread between Activision's current price and Microsoft's offer is wider than typical proposed mergers, which usually have a single-digit difference in price until the deal is completed.

Contributing to the large deal spread is likely a combination of both Tuesday's sell-off in the stock market, in which the Nasdaq 100 Index fell as much as 2.5%, and heightened regulatory scrutiny towards the merger activity of mega-cap technology companies.

Also on Tuesday, the Federal Trade Commission and the Justice Department's antitrust unit began rewriting merger guidelines in a sign of more skepticism on M&A.

But according to Wedbush analyst Dan Ives, Microsoft doesn't face as much scrutiny as Alphabet, Apple, and Meta Platforms, since the software giant also faced anti-trust scrutiny in 2001.

"From a regulatory perspective, Microsoft is not under the same level of scrutiny as other tech stalwarts and ultimately Nadella saw a window to make a major bet on [the] consumer while others are caught in the regulatory spotlight and could not go after an asset like this," Ives said in a note. 

If the deal is not approved by regulators, Microsoft will owe Activision a hefty $3 billion breakup fee. "While we expect this deal to ultimately clear regulators, however there will be some inherent speed bumps navigating both the beltway and Brussels on a tech deal of this size," Ives said.

One company that is likely to make a fuss about the proposed merger is Sony, which fell 7% on Tuesday. At risk for Sony, if the deal closes, is Microsoft's ability to make blockbuster game franchises like "Call of Duty" exclusive to its Xbox video game console, blocking out Sony's Playstation. 

That wouldn't be a new strategy for Microsoft. After the company acquired video game developer Bethesda for $7.5 billion in 2021, Microsoft said it would make its upcoming games like Starfield exclusive to Xbox and PC.

Regulators could try to take aim at this business practice and point to Microsoft's latest actions with Bethesda as supporting evidence, leading to either a botched merger or concessions around the deal.