Netflix Faces a Bidding War for Warner—and the Stock Market Hates the Idea

President Donald Trump attended the Kennedy Center Honors on Sunday. (Photo by Allison Robbert/Getty Images)

Key Points

• Netflix shares dropped 3.4% on Monday following Paramount’s all-cash bid of $30 per share for Warner Bros. Discovery.
• Netflix’s offer for Warner values the company at $27.75 per share, comprising cash and Netflix stock, totaling an $82.7 billion enterprise value.
• The Netflix-Warner deal faces regulatory scrutiny, with President Trump expressing concerns about potential market share issues.

Netflix stock was dropping again on Monday after Paramount Skydance tried to one-up the streaming giant with a hostile bid for Warner Bros. Discovery .

Netflix shares fell 3.4% on Monday, while the S&P 500 was off 0.4%.

The selloff came after Paramount on Monday made an all-cash offer of $30 a share for Warner Discovery. Paramount said its bid was a better deal than Netflix’s for Warner shareholders, and more likely to be approved by regulators.

Netflix on Friday struck a deal to buy Warner’s film and TV studios and the HBO Max streaming service. Its offer values Warner at $27.75 a share: $23.25 in cash and the remainder paid in Netflix stock, implying an enterprise value of around $82.7 billion.

Investors had worried that Netflix was overpaying for Warner, particularly given that the latter company’s streaming revenue has flatlined over the past year. Pivotal Research Group analyst Jeffrey Wlodarczak said in a research note published on Monday that the deal was “an $83 billion admission of long-term headwinds,” downgrading Netflix to Hold from Buy and cutting his price target to $105 from $160.

Paramount’s hostile bid raises the possibility of Netflix having to make an even more lucrative offer for Warner. If Warner walks away from the deal, or accepts an offer from a rival party, it will owe Netflix $2.8 billion, per Friday’s agreement.

Even if Paramount’s counter offer fails, Netflix may struggle to get the deal approved by regulators. President Donald Trump said late Sunday before an event at the Kennedy Center that the Netflix-Warner Bros. deal “could be a problem” due to the “very big market share” it would give Netflix.

Netflix stock has dropped 22% over the past three months, but is still up 8.6% this year.

Write to George Glover at george.glover@dowjones.com