Microsoft's Activision deal wipes $20 Billion off Sony's valuation in a day

A graphic showing Microsoft acquiring Activision Blizzard

Last night, Microsoft surprised everyone as the Redmond giant announced that it is acquiring video game publisher Activision Blizzard for a whooping $68.7 Billion, all paid in cash.

The deal had a negative impact on Sony as the company's share price fell as much as 13% on Tokyo's stock market during the trading hours and wiped off $20 Billion off the company's valuation. The same situation was seen in the US as the company's stock on the NYSE slid 7% last night.

In a note to clients, popular market strategist Amir Anvarzadeh wrote, "Sony will have a monumental challenge on its hand to stand its own in this war of attrition. With Call of Duty now most likely to be added exclusively to the Game Pass roster, the headwinds for Sony are only going to get tougher", while suggesting the clients to short the stock.

Activision, on the other hand, saw a massive 25% jump in its share price and closed at $82.33, up from $65 on Friday. If the transaction goes through, Microsoft will be acquiring the company at a premium, paying $95/share. Activision was not the only company that saw a jump in the share price, as prices of both Nintendo and Konami rose by as much as 2.51% and 3.25%, respectively.

While, Microsoft's acquisition of Activision is a blow to Sony, analysts predict that the drop in the share price was a typical overreaction by games industry investors.

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