The Bloody Streaming Throne Fight: Trump's Antitrust Hammer Hits Netflix Hard as Paramount's Billion-Dollar Raid Torches Wall Street

TradingKey – Netflix (NFLX.US) is facing an uphill battle for Warner Bros. Discovery, grappling with skepticism from Donald Trump and a multi-billion dollar hostile takeover bid from rival Paramount, reflecting market doubts about its success.

Netflix's stock, after a strong first-half performance, has been declining since its second-quarter earnings report. The company projected lower operating margins for the second half of 2025 due to increased content amortization and sales and marketing costs, which subsequently impacted market sentiment.

More recently, Netflix's stock took another hit after it announced its acquisition intent for Warner. Since late June, the stock has plunged 28%, making it one of the worst-performing shares in the Nasdaq 100 Index for the second half of the year.

[Netflix Stock Performance Year-to-Date, Source: Google Finance]

Under the proposed terms, each Warner Bros. Discovery (WBD) shareholder would receive $23.25 in cash and $4.50 worth of Netflix common stock per share upon completion of the deal.

Rich Greenfield, co-founder of LightShed Partners, stated that the deal's economics are likely to pressure Netflix in the short term before yielding long-term benefits. Crucially, if the acquisition is terminated due to regulatory reasons, Netflix would owe Warner a hefty breakup fee of nearly $5.8 billion.

On December 7, Eastern Time, the Trump administration raised antitrust concerns about Netflix's bid. Then, on Monday, December 8, Eastern Time, Paramount CEO Ellison bypassed Warner's board to launch an all-cash offer of $30 per share directly to shareholders. This represents a 139% premium over Warner's stock price and surpasses Netflix's mixed cash-and-stock offer of $27.75 per share. Ellison also hinted to Warner's CEO that Paramount was willing to bid even higher.

Market skepticism surrounding Netflix's acquisition is growing. Notably, even if Warner Bros. unilaterally defaults on the deal with Netflix, it would only incur a $2.8 billion penalty (approximately 3.89% of the equity value). This is a relatively minor cost compared to Netflix's potential $5.8 billion breakup fee or Paramount's premium offer.

[Market Probability of Netflix Acquiring Warner Bros. Success, Source: polymarket.com]

As of now, betting on prediction market Polymarket shows Netflix's probability of completing the acquisition by the end of 2026 at 16%, down from 23% before Paramount launched its hostile bid.

Why is the Market Bearish on Netflix's Warner Acquisition?

While Netflix co-CEO Ted Sarandos stated on Friday's investor call that he was "confident" in the regulatory process and insisted the deal would benefit consumers, employees, and innovation, market views diverge. Analysts point to potential antitrust concerns, echoed by Trump, arguing that a combined Netflix-Warner entity would possess a market capitalization far exceeding other streaming companies, potentially problematic for market share.

Secondly, Paramount's higher bid forces Netflix into a dilemma: either raise its offer or abandon the acquisition. Both options pose significant short-term financial strain, whether through paying a hefty termination fee or an acquisition premium, which would temporarily disrupt Netflix's balance sheet. Therefore, Netflix finds itself in a difficult predicament.

Furthermore, a prevailing market view suggests Paramount has political backing. Financing terms released Monday revealed that Jared Kushner, Donald Trump's son-in-law, will participate in Paramount's bid for Warner through his firm, Affinity Partners. Although Trump stated he hasn't discussed the matter with Kushner, the market has interpreted this as an implicit government endorsement, further disadvantaging Netflix's bid.

From the perspective of Warner Bros. Discovery (WBD) investors, the priority is maximizing returns, and the clear consensus is "highest bidder wins." Even if Warner intends to finalize a deal with Netflix, it would require a premium acquisition that is well-received by investors. Should Netflix successfully acquire Warner, the premium paid would likely dampen its stock's short-term upside, representing an implicit loss for shareholders.

We believe that despite Netflix's current first-mover advantage, the situation remains highly uncertain. Paramount Pictures is poised to exert pressure from shareholders, regulators, and political spheres to thwart Netflix's acquisition, potentially turning this bidding war into a prolonged battle.