ResearchThree Things (10/16)

Three Things (10/16)

Oct 16, 2023

“If it's hemorrhaging cash, you've got to do something about it. You can't live with your head in the sand." – Jim Ratcliffe

Mega-merger for Microsoft

Microsoft closed its $69 billion acquisition of gaming firm Activision Blizzard, according to a regulatory filing by the company on Friday. The completed deal comes after Great Britain’s Competition and Markets Authority gave the green light to Microsoft’s proposed acquisition. It’s Microsoft’s largest deal in its 48-year history and bolsters the company's gaming operation, which is in distant third place in the game console market, behind Nintendo's Switch and Sony's PlayStation 5.

The move is a dramatic step towards diversifying the company’s business beyond its core areas such as operating systems and productivity software. It’s important to remember: acquisitions are not automatic indicators of success. Microsoft's $2.5 billion purchase of Minecraft-maker Mojang in 2014 has been lucrative, but its $7.5 billion deal for ZenMax has resulted in a flop. 

Statutes on shorting

The SEC finalized rules on Friday that require hedge funds and other big investors to report gross short positions in certain stocks at the end of each month. The ruling extends to other securities, such as derivatives, as well. Reporting will generally be triggered if a hedge fund reaches a $10 million average short position during the reporting month, or a 2.5% gross short position relative to total shares outstanding. 

Short selling has long been a fixture of the US equity market, but the practice has grown more controversial. Unsurprisingly, the industry has pushed back on many of the proposed disclosures but the new ruling could change market dynamics and the flow of information moving forward.

United we stand

British billionaire, Jim Ratcliffe, is in talks to acquire a minority stake of Manchester United in a deal that would value the globally renowned soccer club at more than $3.3 billion. Ratcliffe is rumored to acquire ~25% of Manchester United’s nonvoting shares, which are listed on the New York Stock Exchange and would be purchased at a significant premium to $20, where the stock closed Friday. The current owners invited prospective buyers to bid for all or part of the team almost a year ago as part of a strategic review of the club. 

The move to buy a portion of the club comes as marquee sports-teams brands are attracting record valuations and big time investment opportunities. Such operations come up for sale infrequently, and buyers are betting on their cachet—and in cases like Manchester United, their global appeal—to generate profits. 

As of writing this newsletter, MSFT is a holding in Titan's Flagship strategy.

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