In the words of Nicole Kidman, alone in a multiplex, “somehow, heartbreak feels good in a place like this.”
Netflix (NASDAQ: NFLX) officially bowed out of the battle for Warner Bros. Discovery (NASDAQ: WBD) late last week. Paramount Skydance (NASDAQ: PSKY) raised its hostile bid for the parent company of HBO, and Netflix conceded that the price was too rich for its blood. Both the winning and losing bidder soared on Friday. You don’t see that very often.
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If you’re a subscriber to several of these streaming services, this probably isn’t good news. Netflix could’ve used its scalability to lower prices, or at least bundle the premium offerings at a discount. Paramount Skydance could also take the same path, but given its expanding debt and the combined company’s struggles with digital profitability, it might not have the same wiggle room. Is anyone actually paying for Paramount+ with all of the free offers available?
As one of Netflix’s longest-running retail investors — having owned my piece since the fall of 2002, when it was a broken IPO — I couldn’t be happier. The market action on Netflix over the past few months says it all.
Going back to when Netflix first entered the bidding war for Warner Bros. Discovery, weeks ahead of its early December $72 billion deal (or $83 billion once accounting for the assumed debt), Netflix stock fell by more than $100 billion in market cap at one point. In short, the market thought that the combined entity was worth less than Netflix on its own.
Over the past four trading days of last week, bullish momentum returned. Paramount Skydance drummed up a superior offer. Netflix threw in the towel. Netflix found victory in defeat.
In less than a week, the market has warmed up to Netflix as a swinging single. Netflix is now worth more on its own than it was a week ago, when it was the one wearing the Warner Bros. Discovery engagement ring. Throw in the $2.8 billion it’s now collecting from Warner Bros. Discovery for terminating the deal, and it’s a cherry on the sundae.
