Should You Sell Netflix Stock Before It Wins the Warner Bros Takeover?

Core Viewpoint - Netflix's acquisition of Warner Bros. Discovery's premium assets, valued at approximately $72 billion, has raised concerns among investors regarding the financial and strategic implications of the deal [2][4]. Group 1: Acquisition Details - The deal, announced on December 5, values Warner Bros. assets at around $72 billion in equity, with an enterprise value of $82.7 billion, structured as a mix of cash and stock [2]. - Netflix will pay $23.25 in cash and $4.50 in stock per WBD share, which may require the company to deplete its cash reserves and potentially raise additional capital through debt or equity issuance [6]. Group 2: Market Reaction - The market's response to the acquisition has been negative, with NFLX stock closing at $93.50 per share on December 23, down 6.7% from pre-deal levels [5]. - Despite the decline, NFLX trades at 10x sales and 37x forward earnings, indicating high growth expectations but also vulnerability to further setbacks [5]. Group 3: Integration Challenges - Integration challenges are anticipated due to the contrasting cultures of Netflix's data-driven approach and Warner Bros.' traditional Hollywood operations, raising fears of execution risks similar to past media mergers [7]. - The deal strategically excludes WBD's declining linear TV assets, which will be spun off as Discovery Global in late 2026 before the deal's closure [7].