Netflix shares drop after Paramount launches hostile takeover bid

Netflix shares dipped Monday aft Paramount announced a hostile takeover bid, fueling worries connected Wall Street that the streaming elephantine whitethorn not beryllium capable to propulsion disconnected its audacious acquisition.

Netflix banal closed down astir 3.5% to $96.79 a stock aft Paramount moved to instrumentality its lawsuit straight to Warner Bros. Discovery shareholders, offering $30 a stock successful a woody valued astatine $78 cardinal for the full company. Last week, Netflix said it reached an statement with WBD to bargain its movie and TV studios, Burbank lot, HBO and HBO Max for $27.75 a share, a $72-billion offer. Netflix would besides instrumentality connected much than $10 cardinal successful Warner Bros. debt, for a woody worth of $82.7 billion.

On Monday, expert Jeffrey Wlodarczak, CEO of Pivotal Research Group, downgraded his standing connected Netflix banal from bargain to hold, citing concerns that Paramount’s bid could summation the terms Netflix could wage for the WBD assets. Regulatory issues whitethorn besides alteration the presumption of the deal, specified arsenic Netflix giving up HBO to a rival, Wlodarczak said. “The question is, what modifications mightiness they person to make?” helium said.

Wlodarczak besides questioned Netflix’s engagement levels with customers, which is cardinal to retaining subscribers connected the platform. He said that “this precise costly deal” highlights Netflix’s interest that short-form amusement connected platforms similar TikTok and YouTube are attracting younger consumers.

YouTube — erstwhile known arsenic a spot for amateur user-generated videos — has go an amusement powerhouse, encapsulating the largest percent of streaming connected U.S. TVs, according to Nielsen. In October, YouTube represented 12.9% of U.S. TV viewing time, compared to Netflix’s 8%.

Netflix said its lawsuit engagement “remains healthy,” noting successful a shareholder missive successful October that it grew its engagement successful the U.S. and U.K. by 15% and 22%, from the 4th fourth of 2022 to the 3rd 4th of 2025, citing information from Nielsen and Barb, which tracks viewership.

Equity probe steadfast MoffettNathanson analysts said questions person been gathering astir Netflix’s engagement growth, adding that adjacent though Netflix’s stock of full TV clip started to turn successful the 2nd fractional of the year, “YouTube’s stock gains person overshadowed astir of the different streaming platforms.”

“There’s issues with Netflix engagement, benignant of flatlining,” Wlodarczak said. “You get a batch amended content, it should assistance with your engagement. … Is this a awesome they’re truly starting to get disquieted astir engagement, and they’re retired doing this woody due to the fact that younger radical are conscionable spending expanding amounts of clip not sitting determination watching hour-long shows?”

Netflix declined to remark connected Wlodarczak’s report.

On Friday successful a telephone with investors, Netflix executives emphasized that their concern is steadfast and growing. They pointed retired however sci-fi deed amusement “Stranger Things” was precise fashionable with younger audiences, arsenic good arsenic bid similar the play “Outer Banks” and movies including “KPop Demon Hunters.”

“We had grounds engagement erstwhile quarter,” said Co-Chief Executive Ted Sarandos connected the Friday call. “We’re blessed with our outlook for the ongoing integrated maturation and engagement … Our halfway fundamentals are strong. This gives america a precise unsocial accidental to accelerate an already precise palmy model.”

Whether the woody volition spell done remains an unfastened question, arsenic Netflix would not marque the acquisition until 12 to 18 months from now, aft Warner Bros. Discovery separates its company, spinning disconnected its cablegram channels into a caller publically traded company.

Wedbush Securities analysts, who person an outperform standing connected the stock, said successful a enactment connected Monday that they are skeptical that the woody volition walk regulatory scrutiny.

“Ultimately, we deliberation the DOJ volition cull a woody without concessions connected pricing and manufacture standards,” the analysts wrote.

On Monday, Netflix executives said they were assured the woody would spell through. Co-Chief Executive Greg Peters pointed retired that Netflix inactive represents a smaller stock of U.S. TV viewing successful the U.S. compared to YouTube, adjacent if it were to harvester with Warner Bros. Discover, citing Nielsen data.

“We deliberation there’s a beardown cardinal lawsuit present for wherefore regulators should o.k. this deal,” helium said.

Wlodarczak said helium believes determination are benefits to Netflix acquiring the Warner Bros. Discovery assets. The Los Gatos, Calif., streamer would summation entree to characters including Batman and Harry Potter.

It besides prevents rivals similar Paramount from getting bigger.

“They’re starting to get ample capable to physique a credible menace to Netflix,” Wlodarczak said. “So by buying this happening … it’s going to beryllium truly hard to get arsenic ample and person arsenic overmuch standard arsenic Netflix.”

Times unit writer Meg James contributed to this report.