Key Takeaways
- Netflix shares fell Thursday, a day after after closing at a seven-month low, as investors mulled the likelihood it beats out Paramount Skydance in a bidding war for competitor Warner Bros. Discovery.
- Netflix is seen as the preferred buyer, but federal officials have reportedly raised antitrust concerns.
Netflix could be on the verge of a big purchase. Wall Street’s not thrilled about it.
The streaming giant is reportedly the odds-on favorite to acquire competitor Warner Bros. Discovery (WBD). That hasn’t helped the stock: Netflix (NFLX) shares were down more than 1% in recent trading—after falling to a seven-month closing low on Wednesday.
Netflix is vying with fellow streamers Comcast (CMCSA) and Paramount Skydance (PSKY) to acquire the owner of the HBO Max streaming platform and a deep bench of intellectual property that includes Harry Potter, Game of Thrones and DC Comics.
“The market is witnessing the endgame of the cable TV era,” Bank of America analysts wrote last month, calling Warner Bros. “another domino in a likely cascading series of transactions that redefine the competitive fabric of the media & entertainment industry.”
Why This Is Important
The acquirer of Warner Bros. Discovery will gain ownership of some of the world’s most valuable intellectual property, including the Harry Potter universe. It will likely also combine two of America’s largest streaming platforms, further consolidating an industry already dominated by just a few companies.
Netflix and Paramount Skydance are considered the leading contenders, but shareholders of both appear to have reservations about the deal. Their shares are down about 6% and 9%, respectively, since submitting their first bids Nov. 20. Netflix didn’t respond to Investopedia’s request for comment in time for publication.
It’s common for a company’s stock to fall when it submits a big takeover offer, because the buyer usually pays a premium to sweeten the deal. On top of that, some existing investors may doubt the wisdom of the tie-up or decide that they’re not interested in owning the combined company.
But there may be more to Netflix stock’s recent slide. White House officials have reportedly raised antitrust concerns, arguing the combination of Netflix and HBO Max could give the combined company too much power over the entertainment industry.
President Donald Trump also looms over the deal. The New York Post recently reported that a Netflix offer “faces mounting opposition from the Trump administration,” citing antitrust concerns.
Trump is also closely tied to Larry Ellison, father of Paramount Skydance CEO David Ellison. Any ensuing litigation could jeopardize a deal, bog down Netflix in a costly legal fight, and otherwise amplify government scrutiny of the company.