Microsoft Corporation

[EnSabahNur]

In general, western companies tend to form JVs or simply just sign business deals without creating any form of ownership. This form of "taking stakes in your business partners" are generally only practised by Asians (eg. Japanese Zaibatsus, Asian Godfathers, Korean Chaebols etc)

Microsoft to Buy 4% of London Stock Exchange on Cloud Deal

Do you have any ideas why a stake is required? Their rivals Google and Amazon did the same with ICE and NASDAQ.

On another point, does anyone have any thoughts on what happens if MSFT satisfy the major regulators (FTC, Europe, CMA etc), but a country like China blocks the acquisition? Can they do something just for that market to satisfy the regulator, for example keeping the businesses separate in that market?

[weijian]

Do you have any ideas why a stake is required? Their rivals Google and Amazon did the same with ICE and NASDAQ.

Hi EnSabahNur, I did a google search on the previous deals and it seems all 3 are not exactly the same.

Google and CME: CME gets new capital in the form of selling non-voting convertible preferred stock to Google.

Amazon and Nasdaq: no stakes involved.

Microsoft and LSEG: Microsoft buys out existing shareholders (looks like those who gotten LSEG shares when it sold Refinitiv to LSEG in a all-share deal, eg. Blackstone/Thomas Reuters) with no new capital raised at LSEG.

Obviously I am not privy to the actual negotiations for the deal and so I do not have a definitive answer. But as I have mentioned, taking stakes in your business partners are actually quite common especially in Asian business circles. For example, in 2018, Jardine Cycle and Carriage invested 200mil USD in Toyota Motors, who is the main car brand partner of the former's Indonesian subsidiary Astra International. My guess is all these are just a show of commitment to build relationships which demonstrates "skin in the game" and is much better than any sort of legal binding documents that still eventually ends up in long dragged out court battles.

[EnSabahNur]

ICYMI

Microsoft-Activision deal: Gamers sue to stop merger

Microsoft faces legal action from 10 gamers to block its merger with Call of Duty maker Activision Blizzard.

The lawsuit filed in a US federal court says the $69bn (£56bn) deal by the Xbox console maker to purchase its rival will "create a monopoly in the video game industry".

https://www.bbc.com/news/business-64047809

[weijian]

For "asset light" businesses with zero marginal costs, rather than use it on sharebuybacks/dividends, FCF is always better spent betting it on realizing its product roadmap or existing stickiness of the products on the market.

Microsoft eyes $10 billion bet on ChatGPT

But Microsoft’s investment isn’t much of a gamble. ChatGPT is bleeding money: Each time someone engages with its chatbot, it costs the company a few cents in computing power, according to Sam Altman, CEO of OpenAI. But it’s going to be spending most of it on Microsoft’s cloud business, which is working hard to reach parity with competitor Amazon Web Services.

If OpenAI figures out how to make money on products like ChatGPT and image creation tool Dall-E, Microsoft will get 75% of the profits until it recoups its initial investment.

Beyond the financial risks and rewards for Microsoft, the bigger prize is that it gets to work alongside OpenAI in developing the technology on Microsoft Cloud, which instantly puts Microsoft at the forefront of what could be the most important consumer technology over the next decade.

https://www.semafor.com/article/01/09/20...on-chatgpt

[CY09]

IMO share buybacks are essential, this is because shareholders get a message (i) the company knows the approximate price where the deep discount is for the worth of their company/conglomerate and (ii) acts as the buyer of last resort.

Buying back shares at a deep discount acts as a way to grow earnings for shareholders (even if the company's profit is stagnating)

[EnSabahNur]

Looks like the Microsoft and Activision deal may cross one major hurdle soon

https://www.reuters.com/markets/deals/eu...023-03-02/