Activision (ATVI) stock has recently been under pressure on news that Vivendi might be looking to sell a large chunk of shares. Currently owning 61.5% of the company, Vivendi pulling out could/should depress the stock price.
With Diablo on the market and Mists of Pandaria expected soon, Blizzard will have nothing to get investors excited about, at least not to the upside. We do, however, have WoW subscription numbers to lose sleep over. Subscriber losses have been a major driver of the stock in recent quarters. But Blizzard has an ace up its sleeve.
Codenamed "Titan", Blizzard has been working on its next-gen MMO for years now. Investors probably wouldn't have a clue if not for a leaked production schedule targeting a 4Q13 release date. WoW was announced in September 2001 and released in November 2004. If investors are expecting a 4Q14 release, we should have already had an official announcement.
Titan is a key driver of long-term shareholder value. Blizzard has been expensing tens of millions of dollars into R&D every year to develop a game that has yet to generate a dollar of revenue. But once released, revenue from Titan will likely ramp faster than for WoW and should quickly eclipse it. Few companies have such an attractive opportunity for incremental reinvestment. At the very least, an official announcement will give investors an idea of how much development work has been done and it will allow us to model some Titan revenue to offset WoW losses.
Vivendi knows how important Titan is, and it makes no sense for them to sell ATVI shares without the value of Titan being accounted for. At 14x trailing earnings with a quarter of its market cap in cash on the balance sheet, continued growth in CoD, and Diablo and the new Skylanders franchise beating all expectations, Titan is not being accounted for. A press release and a simple website could net Vivendi hundreds of millions in its sale of ATVI, a no-brainer move. That, and/or it should sell its shares back to the company.
Disclosure: I am long ATVI.