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A member of Congress bought a stock that is being targeted by the Federal Trade Commission (FTC). Here’s a look at the purchase and what it could mean.
What Happened: One of the big storylines in 2023 could be the case between the FTC and Microsoft Corp (NASDAQ:MSFT). The issue revolves around a planned acquisition by Microsoft of video game giant Activision Blizzard (NASDAQ:ATVI) worth $68.7 billion.
The FTC filed a lawsuit on Dec. 8 to block the planned acquisition of Activision Blizzard for $95 per share. The complaint said Microsoft would be able to “suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content.”
Microsoft plans to fight the lawsuit and continue to pursue the closing of the acquisition.
Xbox is one of the largest video game consoles in the world and competes with the likes of the PlayStation franchise from Sony Group Corp (NYSE:SONY) and the consoles from Nintendo ADR (OTC:NTDOY).
U.S. Rep. Alan S. Lowenthal (D-N.Y.) bought shares of Activision Blizzard days after the FTC announced its lawsuit, as reported by CongressTrading.
The congressman bought $1,000 to $15,000 worth of ATVI shares on Dec. 12 and another $1,000 to $15,000 on Dec. 14 according to a filing. He paid an average of $74.38 to $77.55 based on the trading ranges of ATVI stock on the two respective days.
“Does he know it will go through, or will he lean on regulators?” CongressTrading tweeted on Thursday.
Lowenthal has been a member of Congress since 2013 but did not run for re-election in 2022, meaning he will vacate his seat in 2023.
Related Link: Does Lobbying Control Congress Members Stock Trading
Why It’s Important: Microsoft's top bosses have remained confident the deal will go through despite the FTC lawsuit.
“I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Activision CEO Bobby Kotick told employees.
Microsoft Gaming CEO Phil Spencer told consumers the popular Call of Duty game would not become exclusive on the Xbox console.
“We’re not taking Call of Duty from PlayStation. That’s not our intent,” Spencer said during an interview on YouTube. “Our intent is not to do that and as long as there’s a PlayStation out there to ship to, our intent is that we’ll continue to ship Call of Duty on PlayStation.”
Activision recently announced a deal to put Call of Duty on Nintendo consoles, which could support the case that Call of Duty won’t end up as an Xbox exclusive.
Spencer also used the example of Microsoft acquiring Mojang Studios, the company behind Minecraft and keeping the game on multiple consoles.
Lowenthal sits on committees for transportation, infrastructure and natural resources and may have little to do with any oversight on antitrust concerns. The Congressman will also have a limited time as a member of Congress to make his opinion on the case known.
Instead, Lowenthal could be playing the arbitrage game and thinking the deal will go through and shares would be valued at $95 instead of the current $75. This is the bet that Berkshire Hathaway Inc (NYSE:BRKA)(NYSE:BRKB) and Warren Buffett could be hoping for now.
ATVI Price Action: Activision shares were up 12% year-to-date in 2022 and traded at $75.60 on Thursday. Shares have traded between $61.99 and $86.90 over the last 52 weeks, with investors concerned about the deal going through from the moment it was announced.
Photo: Sergei Elagin via Shutterstock
