Warren Buffett's Berkshire Hathaway is poised to score a $1 billion profit after Microsoft beats FTC in Activision case

• Berkshire Hathaway is poised to score a $1 billion profit after Microsoft prevailed against the FTC in its bid to acquire Activision.
• Activision Blizzard stock surged more than 10% on Tuesday to just a couple dollars below its $95 buyout price.
• Warren Buffett's Berkshire Hathaway owned nearly 50 million shares of Activision at the end of the first quarter.

Warren Buffett's Berkshire Hathaway is poised to score a more than $1 billion profit in its Activision Blizzard stake after Microsoft prevailed against the FTC on Tuesday in its bid to acquire the video game company.

That's assuming that Berkshire Hathaway held onto its stake in Activision Blizzard and didn't sell any shares since it reported owning a $4.2 billion position in the company at the end of the first quarter.

Berkshire Hathaway first purchased a stake in Activision Blizzard in the fourth quarter of 2021, just a few months before Microsoft announced its proposed acquisition of Activision. The position was initiated by one of Berkshire Hathaway's portfolio managers, either Todd Combs or Ted Weschler, according to Buffett.

Berkshire Hathaway's first Activision purchase was about 14.6 million shares at an average price of about $77 or $78 per share, Buffett said in a February 2022 letter.

But the stake soon became a merger arbitrage position following Microsoft's announced deal for Activision. And Berkshire Hathaway — at the direction of Buffett himself — increased its position in the company by 49.7 million shares in the first quarter of 2022 at an average estimated price of $72.96 per share, according to data from WhaleWisdom. 

"Every now and then I see something that I want to do in that field [merger arbitrage]," Buffett said at Berkshire Hathaway's 2022 annual shareholder meeting. "It is my purchase, not the manager who bought it some months ago. If the deal goes through, we make some money."

Berkshire Hathaway ultimately built its Activision stake to a peak of 68.4 million shares in the second quarter of 2022 at an estimated weighted average price of $73.95 per share, Insider calculated. Since then, the conglomerate pared down its position in the third, fourth, and first quarters of 2022 and 2023, respectively, to 49.7 million shares.

If Microsoft is able to close its deal for Microsoft at its all-cash offer of $95 per share, which sources tell CNBC's David Faber could happen as soon as next week, Buffett's Berkshire Hathaway would see a profit windfall of just over $1 billion based on its stake reported at the end of the first quarter and its estimated weighted average price paid for the stock.

Shares of Activision soared as much as 12% on Tuesday to about $92 per share following news that the court blocked the FTC's bid to stop the deal. The stock is still about $3 away from its buyout price of $95 per share.