I want to talk about how a mature management handles decisions. Yes, I am harking back to the Illumina Grail debacle. There is a valuable lesson here We all know how a high flying company called Illumina is quoting at its all time low share price of just over $158.
Firstly, a cocky CEO decided that the FTC and EU competition authorities are non entities and proceeded to acquire Grail despite their explicit warnings. Then he continued to fight the FTC and Competition authorities in the court. When EU levied a fine of more than 425 million dollars, they made a reserve and still continued fighting. Then we had activist investor Carl Icahn looking at these proceedings and noting the steep fall in share price decide to intervene. Carl Icahn is drawn to these situations like a bull to a red rag. This led to the chairman of the board losing his seat and a few months later CEO D’souza threw in the towel. All the while, the Illumina management in my opinion did not respect the shareholders interest as the share holder value steadily crumbled. Even today, they have are coveting Grail.
Now lets look at Microsoft. I have a table of events here to show how a professional company that respects all its stake holders conducts itself. Lets go through their sequence of event.
| Date | Event |
|---|---|
| January 18, 2022 | Microsoft announces intent to acquire Activision Blizzard for $68.7 billion in cash. |
| Under the terms of the agreement, Microsoft would own Activision, Blizzard Entertainment, and King under the Microsoft Gaming division as a sibling to Xbox Game Studios. | |
| The acquisition would give Microsoft ownership of franchises including Call of Duty, Crash Bandicoot, Spyro, Warcraft, StarCraft, Diablo, Overwatch, and Candy Crush. | |
| If approved by international regulators, it would be the largest video game acquisition in history. | |
| Sony publicly argues against the merger, expressing concern that the combined company would make games like Call of Duty console exclusive to the Xbox family. | |
| Sony makes a binding agreement with Microsoft to keep Call of Duty on PlayStation for 10 more years until 2033 after the merger. | |
| Several countries approve the merger, including the European Commission and China. | |
| The U.S. Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA) file complaints to block the acquisition, citing concerns about competition, particularly in the cloud gaming sector. | |
| Microsoft responds by committing to offer Call of Duty and other games to Sony and other platforms for a decade. | |
| Microsoft also agrees to sell streaming rights of Activision Blizzard games to Ubisoft’s gaming service Ubisoft+ for 15 years as an appeasement for the CMA. | |
| July 2023 | The FTC formally withdraws its challenge to block the merger after failing to obtain injunctions. |
| Currently | The CMA is reviewing the revised merger terms. |
| October 18, 2023 | The deal is expected to close by this date. |
The deal worth $69 million. Microsoft and Activision agreed last month to extend their merger deadline by three months to October 18, to allow more time to come to an agreement with the CMA. October 18 is now also the statutory deadline for a CMA decision on the new merger proposal, and Microsoft said it expects the agency’s review process to be completed ahead of that date.
Microsoft is among the stocks that have enhanced their value even in this difficult market and are much close to their all time high. Meanwhile Illumina has generated huge shareholder value loss.
We as Investors can learn the importance of management philosophy in valuation of stocks. For companies in our Genomics watchlist, I have great confidence in leadership at CRSP and CRBU. What do you guys think? Please comment.
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