Pentwater Capital Management LP led hedge funds boosting stakes in Activision Blizzard Inc. last quarter before a make-or-break July court decision on the video-game maker’s proposed $69 billion merger with Microsoft Corp.
Pentwater, among the best-known firms that focus on event-driven strategies including merger arbitrage, added about 5.87 million shares in the period — more than any other hedge fund — according to quarterly filing data compiled by Bloomberg. That brought its position to 21.3 million shares, which would be worth roughly $1.9 billion at current prices if the firm still holds the shares.
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Jericho Capital Asset Management, Balyasny Asset Management and Citadel Advisors also lifted their holdings last quarter, by at least 2 million shares each. Pentwater and some of the other funds also had options positions in Activision that may have been aimed at hedging the share holdings, the filings show.
The funds’ move to increase the stock positions came before Microsoft won a court fight with US regulators in July, effectively ending months of uncertainty over whether the largest gaming deal ever could survive antitrust scrutiny.
With the merger moving closer to the finish line, Activision shares have rallied about 8% since the end of June to about $91 on Tuesday. Microsoft offered to buy the company at $95 a share. The deal has one final hurdle to clear before its October deadline: approval from UK authorities.
Court Visit
Activision has been one the most-followed positions for the merger-arbitrage community since the deal was announced last year. Portfolio managers and analysts from Pentwater and other funds even went to San Francisco to follow the June hearing in person. By the end, a consensus emerged among them that the Federal Trade Commission was unlikely to be able to stop the deal.
Read More: Microsoft-Activision Trial Has Merger Arbitragers Glued to Court
Investors in Activision went through a wild ride this year, as both US and UK regulators challenged the tie-up, spurring doubts on its outcome and sending Activision stock briefly under $74 in May.
Warren Buffett’s Berkshire Hathaway Inc. slashed its Activision stake by 70% during the second quarter, according to 13F filings. Meanwhile, hedge fund Arrowstreet Capital sold roughly 3 million shares, leaving it with about 2.8 million.
Monday was the deadline for thousands of institutional investors, including hedge funds, pension funds and endowments, to report certain US equity holdings to the Securities and Exchange Commission through quarterly 13F filings.
The data track holdings through the end of June, meaning funds could’ve changed positions since then.
This story was produced with the assistance of Bloomberg Automation
--With assistance from David Marino.
