WBD-Paramount Reactions: Wall Street Analysts Split, Activist Investor Celebrates & Netflix Stock Rises

Stunned though Hollywood and Wall Street were by the flurry of action late Thursday in the Warner Bros. Discovery merger saga, initial reactions to Netflix conceding the fight to Paramount soon surfaced.

Shareholders also made their feelings known during after-hours trading. Shares in Netflix jumped 9% as investors seemed to cheer the decision to exit the bidding. Paramount‘s stock shot up almost 6%, on top of a 10% gain during the regular session, while WBD‘s stock slid 1%.

Netflix’s stock may have had the biggest bearing on the events of the day. It had fallen by almost 30% since the company, improbably, was revealed as a leading suitor for the Warner assets.

Ancora Holdings, the activist WBD shareholder that had recently voiced objections to the proposed Netflix deal, called the likely Paramount pact “a win-win for WBD shareholders and the industry.”

Doug Creutz, a veteran media analyst with TD Cowen, wrote in a note to clients that Netflix’s decision to bow out of the bidding “appeared to put the auction process at an end.”

The ultimate outcome, Creutz said, is “what we expected all along.” From here, he said, the regulatory process will be the focus.

“Approval from federal regulators seems likely given the political environment; however, we think it is very likely that some state regulators – most notably, California Attorney General Rob Bonta – could attempt to challenge the deal. We think there is potential for European regulators to have a say as well.”

The result in the shorter term figures to be positive for shareholders, who faced more than two years of purgatory after the WarnerMedia-Discovery merger, in the view of MoffettNathanson analyst Robert Fishman. In a note to clients reacting to WBD’s fourth-quarter earnings (yes, that also happened Thursday), Fishman called the bidding between Netflix and Paramount “the light at the end of the tunnel,” after which WBD shareholders “look to emerge victorious.”

On X, a number of observers pointed out the pitfalls of Paramount owning WBD given concerns about its stewardship of CBS News and creative track record compared with Netflix’s. (Many in the creative community, it should be said, have supported Paramount given the existential worry of a streamer swallowing a theatrical studio. Exhibit A: filmmaker and self-described “humble movie farmer“ James Cameron.)

Tech exec Christina Warren took the other side, posting that it was “truly an awful day for hollywood and for anyone who loves movies and quality tv.”