Netflix shares have plummeted more than 15% since December 5. The market is reacting poorly to an aggressive Netflix Warner merger plan valued at $82.7 billion.
On Wednesday, stocks dipped another 4% in early trading. Co-CEOs Ted Sarandos and Greg Peters spent the day defending the risky acquisition following a tense earnings report.
This deal marks a stunning reversal for the company. Historically, Netflix adhered to a strict “build, don’t buy” philosophy. Now, it is pivoting to absorb a legacy studio to survive an evolving media landscape.
Investors Rattled by Loan Debt and Buyback Suspension
The financial mechanics of the deal are causing anxiety. To fund the purchase, leadership confirmed they have completely suspended share buybacks.
Instead, the company is loading up on debt. Netflix initially secured a $59 billion bridge loan. On Tuesday, they increased that commitment by another $8.2 billion.
This extra capital supports an all-cash offer of $27.75 per share for Warner Bros Discovery’s assets.
A New Embrace of Theaters and HBO
The acquisition targets more than just an archive. It includes the prestigious HBO brand and global franchises like Harry Potter and Game of Thrones.
Most surprisingly, the Netflix Warner merger signals a U-turn on cinema. Previously, executives dismissed movie theaters as outdated.
“We have often debated building a theatrical business, but we were busy elsewhere,” Greg Peters admitted.
He described the Warner Bros operation as a “mature, well-run theatrical business” that the streamer is now eager to manage.
Why the Sudden Strategy Shift?
Ted Sarandos identified a primary threat driving this decision: the dominance of Big Tech. He specifically cited Alphabet’s YouTube as a competitor reshaping digital media.
Sarandos argued the business model must adapt to remain viable. The acquisition offers three critical advantages:
- Franchise IP: Immediate ownership of a century of iconic content.
- Theatrical Power: Instant access to box office revenue streams.
- Studio Infrastructure: Expanded capacity for high-quality production.
Regulatory Hurdles Loom
Despite the pitch, the path forward is rocky. Analysts remain skeptical following a lukewarm revenue report. While the final season of Stranger Things may boost numbers, the merger costs are casting a shadow over 2026 forecasts.
Furthermore, Washington is watching. Lawmakers and regulators are expected to scrutinize the deal for antitrust violations.
Sarandos attempted to get ahead of the critics. He framed the consolidation as both “pro-consumer” and “pro-worker.” However, the combination of massive debt and regulatory heat ensures the Netflix Warner merger will face a long, difficult road to closing.
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