The tech and video game sectors were rocked this week when the Federal Trade Commission's request to halt a $69-billion merger in the space was turned down. 

The news could lead to the merger ultimately being approved and might have kickstarted stock market index shuffling.

What Happened: Technology giant Microsoft Corporation (NASDAQ:MSFT) announced a $69-billion acquisition of Activision Blizzard (NASDAQ:ATVI) in January 2022, valuing shares of the video game company at $95 each.

Since the acquisition was announced, the deal has faced regulatory roadblocks. Among those fighting against the merger were foreign regulatory agencies, the FTC and other video game companies like Sony Group Corp (NYSE:SONY).

Federal Judge Jacqueline Scott Corley denied a request from the FTC to stop the merger earlier this week, citing a lack of evidence that the deal poses competitive concerns.

“After considering the parties’ voluminous pre-and-post hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES the motion for preliminary injunction,” the judge said.

The judge does not see enough evidence that competition in the video game sector would be lessened by the merger or that Microsoft willpull titles like those from the “Call of Duty” franchise from Sony and make them exclusive to Xbox consoles.

Shares of Activision Blizzard traded higher on the news of the judge’s decision Tuesday. The FTC has the option to appeal the decision and did so Thursday. 

Related Link: EXCLUSIVE: Activision Blizzardd's Focused Strateegy Is Working, Mobile Was Largest Segment In Q1 

One Indicator That Deal Is Close: With shares of Activision Blizzard trading high, investors could see that it is more likely the merger ultimately wins out and goes through after a year and a half of challenges and decisions.

One new piece of evidence on Wednesday may signal the merger is more likely to go through.

As one of the largest companies on the Nasdaq stock exchange, which is a unit of Nasdaq (NASDAQ:NDAQ), Activision Blizzard is a member of the Nasdaq 100 Index.

On Wednesday, the Nasdaq announced that Activision Blizzard would be removed from the Nasdaq 100 and the Nasdaq 100 Equal Weighted Index. The Trade Desk (NASDAQ:TTD) will replace Activision, and the change will occur before the market open July 17.

It’s interesting to note that Activision Blizzard has a market capitalization of $71 billion compared to Trade Desk's market cap of $41 billion.

In the press release announcing the change, Nasdaq also clarifies that the swap of The Trade Desk and Activision Blizzard does not have to do with a special rebalancing being done by the index related to the seven largest stocks making up over 50% of the index.

Activision Blizzard is not being delisted from the Nasdaq, as the merger has not been completed.

Here's where the wording in the methodology of selecting when to remove companies from the Nasdaq 100 Index comes in. 

“In the case of mergers and acquisitions, the effective date for the removal of an index issuer or security will be largely event-based, with the goal to remove the issuer or security as soon as completion of the acquisition or merger has been deemed highly probable,” the report reads.

The key here is “highly probable.” By removing Activision Blizzard from the index, Nasdaq could be signaling the merger is now “highly probable” to occur after the judge’s decision to block the FTC’s injunction request.

Replacing the stock before the merger goes through could be a risky move if the Nasdaq did not believe the deal will be completed. Would the Nasdaq re-add the stock back to the index down the road if the deal is ultimately blocked and admit it made a premature move?

Nasdaq told Benzinga it has no comment Thursday when asked for clarification on the removal of Activision Blizzard from the index.

ATVI Price Action: Activision Blizzard shares closed at $89.54 Thursday and have traded between $70.94 and $92.91 over the last 52 weeks.

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