WBD Stock Climbs as Netflix Shares Drop

Bassyonni

ago 48 minutes

Wall Street’s response to Netflix’s recent $82.7 billion acquisition of Warner Bros. Discovery (WBD) has been mixed, reflecting the typical volatility following such high-stakes deals. By midday Friday, Netflix’s stock fell by 3%, dropping just below the $100 mark. In contrast, WBD shares increased by 5%, continuing a strong upward trend since news of the acquisition circulated in September.

Market Reactions to Netflix and WBD

Although WBD’s 5% gain was modest, it marked a significant increase overall, as its shares have doubled since early September. Other industry players also felt the impact. Paramount’s stock suffered the most, declining by 8%, despite having previously risen 17% following its August merger with Skydance. Comcast, which also vied for WBD’s assets, saw its shares rise by 1%.

Investor Concerns Over Theatrical Standards

Major exhibitors, such as Cinemark and AMC Entertainment, experienced sharp declines, driven by fears that Netflix’s acquisition could disrupt traditional film release strategies.
Ted Sarandos, Netflix’s Co-CEO, reassured that current operations of Warner Bros., including theatrical releases, would remain unchanged for the foreseeable future.

The existing contracts for theatrical releases, established through 2029, would lead to legal repercussions if altered. Analysts are working to understand the implications of this landmark deal. Robert Fishman from MoffettNathanson noted concerns about Netflix’s engagement levels, particularly in North America.

Regulatory Challenges on the Horizon

As the acquisition progresses, Netflix anticipates concluding the deal within the next 12 to 18 months. However, regulatory scrutiny looms large. Analysts believe success hinges on Netflix’s ability to redefine its market position, expanding beyond traditional media to encompass competitors like YouTube and TikTok.

Potential Outcomes Following Approval

Doug Creutz from TD Cowen highlighted the possibility of significant regulatory hurdles. He warned that if the deal were blocked, there could be opportunities for Paramount to re-engage in acquisition discussions. As Warner Bros. remains off the market for now, investors are keenly awaiting clearer strategic directions regarding Paramount’s assets.