Sony Shares Fall 13% Amid Xbox’s Activision Acquisition

"A typical overreaction by games industry investors"

PlayStation Sony Shares
Sony Shares Fall 13% Amid Xbox’s Activision Acquisition

The Xbox announcement, the one about them buying Activision for almost $70 billion in case you missed it, marked the game industry’s biggest buyout in history. While Microsoft says they still plan on making “some” Activision Blizzard games for PlayStation consoles, Phil Spencer is also looking into the future at exclusive content for the Xbox platform. Regardless of what Spencer has said about the content, Sony shares have stumbled over the past 12 hours since the Xbox announcement was made.

The company’s shares fell 7% within the hour after the announcement went live and since has dropped around 13%. Sony’s share closed at the lowest they have been since October 2021. While they have sat lower than this in the past, the steady decline over the past 24 hours could point to an even lower closing for today.

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According to the Financial Times, Sony had brought its shares back to an all-time high in October 2021. In October, the shares sat at the highest price in 21 years. Long-term Sony stockholders say that the current dip in shares is due to the “knee-jerk” fears that the Japanese company had been thrust under pressure due to the Xbox announcement.

Stockholders also believe that Sony is now under more pressure than ever to come up with a big acquisition of its own by either counter-bidding for Activision or seeking out other opportunities that would add the premium to its brand.

It is reported that Sony has about two weeks to tell its investors what plan the company has to help grow organically over the next few months. However, financial experts also say that this drop in share price is a typical overreaction by games industry investors.

“In two weeks at its results meeting, is Sony really going to have to tell the investors that they plan to grow organically after their rival has just made a $70bn deal? If they are going to look at buying something, they have a big advantage on home turf in terms of M&A,” – industry analyst Serkan Toto.

Multiple factors have contributed to the drop in Sony shares. One being the speculation that Microsoft’s deal will dramatically enhance the attractiveness of the Xbox platform and especially Xbox Game Pass. Another is a concern over the Call of Duty series and its possible move away from the PlayStation platform. The series has become a centrepiece in the industry and the PlayStation family of consoles has benefitted from exclusive content deals for multiple years now.

Industry analyst at MST David Gibson says that moving the Call of Duty series away from PlayStation could result in economic suicide.

“The market is guessing what might happen to Call of Duty. It looks like economic suicide if Microsoft makes the franchise exclusive to its own platform, but they may not care if it makes their platform stronger,” said David Gibson, an analyst at MST Financial. What it could do is make Sony go to other publishers who make first-person shooters, like EA [Electronic Arts], and pay for exclusivity for a period to support the PlayStation platform,”

However, after all this, analysts think that this Xbox announcement won’t likely trigger an immediate response from Sony. They believe Sony will still stick to its long-term goal of building high-quality first-party franchises through smaller acquisitions. Something that has been working for Sony for a long time now.

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Source; Financial Times

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