. Investors must price in the risk that merger-phobic regulators block the deal. But that risk hasn’t really changed since the tie-up’s announcement, while Activision’s shares have trended downwards. What has changed is the carnage in the stock market.
Here's how the math works. Arbitrage-focused hedge funds look to balance the probability a deal will close – and the payoff they’ll receive if it does – against where a stock would probably trade if the takeover fails. Microsoft is offeringfor Activision. The stock closed at $65.39 before the transaction became public. Assuming Activision fell back to that price if regulators block the merger, its closing price of $78.
Not so for Twitter. Even considering the nearly 25% decline in the Dow Jones Internet Index since just before Musk made his investment in the company public ahead of announcing his $54.20-a-share offer, its Tuesday closing price of $38.32 implies only around 36% odds that the deal will close. That may even be optimistic: One possibility is that Twitter accepts a lower bid.
$6.9 billion sale to Thoma Bravo. Those moves may be about increasing risks to investors, rather than the deals themselves.
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