:max_bytes(150000):strip_icc()/GettyImages-2187871470-4223f88db84849ba973c19eaaff14099.jpg "How Investors Are Responding to the Netflix-Warner Bros. Deal Today")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2187871470-4223f88db84849ba973c19eaaff14099.jpg)
Key Takeaways
- Netflix on Friday agreed to buy the studio and streaming service of Warner Bros. Discovery, beating out rivals Paramount Skydance and Comcast.
- Shares of Warner Bros. Discovery rose Friday morning, but traded nearly 10% below the $27.75 acquisition price, suggesting some skepticism about the deal on Wall Street.
- Paramount and Netflix stocks both fell Friday, as did the stocks of movie theater chains AMC and Cinemark.
One of the most closely watched bidding wars of the year is over—maybe.
Netflix (NFLX) on Friday agreed to buy the movie studio and streaming service of competitor Warner Bros. Discovery (WBD) in a deal valued at nearly $83 billion. The deal is expected to close after Warner Bros. Discovery spins off its cable division as a separate company in the third quarter of next year. When complete, Warner Bros. Discovery shareholders will receive $27.75 per share.
Netflix shares opened sharply lower on Friday morning before paring back some of their losses to trade down less than 1%. The shares of an acquiring company often fall on news of a deal, because the acquirer usually pays a premium.
Why This Is Important
The stock price of an acquiring company often falls as investors assess the deal’s terms, which usually require the buyer to pay a premium. When a target company’s shares trade below the offer price, it may reflect concerns that the deal could face regulatory hurdles.
Shares of Warner Bros. Discovery climbed about 3%, but remained below the acquiring price, indicating investors see some risk of the deal falling through. The White House and federal regulators have reportedly expressed opposition to the deal on the grounds it could make Netflix too dominant in streaming.
Shares of Paramount Skydance (PSKY), Netflix’s top competition in the bidding war, were down 5% Friday morning. The company, formed earlier this year by the merger of Skydance Media and Paramount Global, accused Warner Bros. Discovery of conducting an unfair bidding process, according to reports Thursday. Paramount Skydance’s close ties to the White House—the company is run by the son of Larry Ellison, the tech mogul and prominent ally of President Donald Trump—could give it a shot at blocking the Netflix deal.
NBC parent company Comcast (CMCSA) also bid on Warner Bros. Discovery, but was not seen as a serious contender in recent days. Its shares were up nearly 3% in recent trading.
Beyond the main parties, shares of AMC Entertainment (AMC) were down about 3% Friday. As part of the deal, Netflix promised to continue giving Warner Bros. Discovery films theatrical releases, though investors in America’s largest movie theater chain may be concerned Netflix’s streaming-first DNA could change Warner Bros. Discovery’s theatrical strategy. Shares of Cinemark (CNK) were down 7% Friday.
