Netflix shares rallied sharply on Friday after the streaming giant withdrew from a contentious bidding war to acquire Warner Bros. Discovery, signaling relief among investors who had grown concerned about a potential overpayment. The decision to abandon the Netflix Warner Bros. acquisition attempt came after rival Paramount Skydance submitted what Warner deemed a superior offer, ending months of uncertainty that had weighed heavily on the streamer’s stock price.
Shares of Netflix rose by 9% to above $92 shortly after trading opened on Friday, while Paramount’s stock similarly rallied by 4% to just under $12. According to Bloomberg, Netflix investors expressed relief at the company’s decision to walk away from the deal, which had raised fears of financial overreach. By exiting the bidding war, Netflix will receive a $2.8 billion breakup fee paid by Paramount.
Why Netflix Walked Away From the Warner Bros. Bidding War
The streaming company had been leading the bidding war with an $83 billion offer for Warner’s studio and streaming businesses. However, when Paramount Skydance submitted a higher bid, Netflix chose not to match the increased price. In announcing its decision, Netflix emphasized its financial discipline, stating that “the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive.”
The company further noted that the transaction was always a “nice to have” at the right price, not a “must have” at any price. This statement underscored Netflix’s commitment to maintaining fiscal responsibility despite competitive pressure in the streaming industry.
Market Impact and Stock Performance
The prolonged bidding war had significantly impacted Netflix’s market valuation. The company’s stock price declined more than 31% over the past six months and nearly 23% since the original deal was first announced. Additionally, the uncertainty surrounding the acquisition had contributed to negative investor sentiment during a challenging period for streaming stocks.
Meanwhile, Paramount Skydance’s stock had also suffered during the bidding process, falling more than 40% since early October. However, Friday’s rally suggested that investors view the successful bid as a positive development for the company’s competitive positioning.
In contrast, Warner Bros. Discovery shares declined more than 2% in early trading on Friday, slipping to $28.20. Paramount’s winning bid offers $31 per share for Warner’s entire business, including its studios, streaming platform, and television networks, valuing the media conglomerate at $111 billion.
Netflix’s Strategic Pivot
With the Warner Bros. Discovery acquisition no longer in the pipeline, Netflix announced plans to redirect its resources toward content investment and shareholder returns. The company stated it will invest approximately $20 billion in quality films and series while expanding its entertainment offering. Furthermore, Netflix announced it will resume its share buyback program, a move likely to please investors seeking capital returns.
This strategic shift reflects Netflix’s focus on organic growth and content development rather than large-scale acquisitions. The decision aligns with the company’s historical approach of building its content library through original programming and targeted licensing deals.
The Paramount-Warner Bros. Discovery deal is expected to move forward pending regulatory approval and final shareholder votes, though specific timelines have not been confirmed by the companies involved.
