Microsoft’s $75bn bid for Activision Blizzard propelled Sony into its biggest one-day drop since the start of the coronavirus pandemic on Wednesday, with shares in the Japanese entertainment conglomerate falling as much as 9.8 per cent in the opening minutes of trading.
But overnight news of the deal also triggered a speculative wave of buying across the rest of Japan’s games sector, with shares in Square Enix and Capcom both surging more than 5 per cent on speculation that they could become acquisition targets in an industry land grab.
Shares in Nintendo and Konami rose 1.95 per cent and 2.29 per cent, respectively, at the Tokyo open, as investors bet that some Japanese names may now consider domestic mergers as a defensive measure against takeover.
The hit to Sony took the company’s shares back to their level of October 2021, ending a run that had taken the stock to a 21-year high at the start of this year.
Traders in Tokyo said that the shares were being crushed by speculation that Microsoft’s deal would dramatically enhance the attractiveness of the company’s Xbox Game Pass — a subscription service that allows members to play games across multiple platforms and directly challenges Sony’s console-centred model.
Damian Thong, a technology industry analyst at Macquarie in Tokyo, said that the Microsoft grab for Activision Blizzard highlighted the US company’s determination to drive its video games business across all platforms.
“It also underscores our longstanding view that a maturing console games business would raise rivalry between Microsoft and Sony, with Microsoft to counter Sony’s market share lead in consoles with heavy content investments,” Thong said in a note to investors.