Warner Bros. Discovery (WBD) shares showed resilience on Monday, standing out as one of the few gainers in a turbulent market marked by escalating trade and tariff uncertainties. The stock experienced a notable increase, rising more than 1% as it continued to enjoy a remarkable surge that has doubled its value in six months.
This upward trajectory follows a barrage of unsolicited takeover bids from Paramount, which has sparked an auction for the entertainment entity. The auction culminated in WBD’s December deal with Netflix, amid ongoing pressure from Paramount’s hostile tender offer.
After languishing under $12 last fall, WBD’s stock has climbed to above $28, standing in contrast to a severe market downturn. The Dow Jones Industrial Average took a significant hit, dropping by 800 points, while broader indices like the Nasdaq, S&P 500, and Russell 3000 also experienced declines of 1.2%, 1%, and 1.8% respectively.
In contrast, Netflix shares fell by 3.3% to about $76, reflecting a cooling investor sentiment towards their involvement with WBD. Paramount’s stock dropped by 2%, as most media entities struggled, mirroring broader market dynamics across various sectors.
Paramount’s latest cash offer stands at $30 per share for all of WBD, aimed at countering Netflix’s proposal of $27.75 per share for Warner Bros. studios and its streaming services. WBD shareholders are also promised stock in a forthcoming cable spinoff, Discovery Global.
The competitive landscape shifted last week when both WBD and Paramount agreed to a critical seven-day window, set to conclude at 11:59 PM on the same day, for David Ellison’s company to strengthen its offer and potentially solidify a binding agreement. Many analysts and industry insiders predict an increase in Paramount’s bid. Robert Fishman from MoffettNathanson anticipates an escalation to at least $32 per share, pushing Netflix to respond. He suggested that a bid around $34 could effectively resolve the bidding war without further contention over Discovery Global’s valuation.
Netflix’s co-CEO, Ted Sarandos, has publicly maintained that the company will stick to its disciplined approach and avoid overpaying in this intense bidding scenario. Paramount retains the flexibility to modify its public tender offer, which is set to expire on March 2, at any moment.
The complexities of these discussions are compounded by regulatory requirements from the Department of Justice and international antitrust authorities. With WBD scheduling a special shareholder meeting for March 20 to vote on the Netflix deal, the dialogue remains heated. Fallout includes accusations from Netflix towards Paramount about spreading misinformation, while Paramount has labeled the negotiation process as biased.
As the situation unfolds, the executives of both companies are anticipated to further elaborate on their strategies during their forthcoming earnings calls. Paramount’s quarterly report is due Wednesday, followed by WBD’s on Thursday. Meanwhile, the market grapples with the recent U.S. Supreme Court decision to strike down significant tariffs imposed by the prior administration. Although this ruling was initially welcomed, it has now led to chaos in the markets, exacerbated by the President’s frustrated attempts to navigate the fallout, with industry giants like Disney, TKO, and Lionsgate experiencing declines.
