Why Netflix’s Mega-Merger Could Crush Your Portfolio

• Netflix (NFLX) acquired Warner Bros studios and HBO Max for $82.7B astatine $27.75 per share. The woody adds 100 cardinal HBO Max subscribers to Netflix’s 300 cardinal accounts.

• Netflix indebtedness volition balloon from $14.5B to implicit $90B portion its debt-to-equity ratio jumps from 0.56 to supra 2.5.

• Integration risks are terrible arsenic 70% to 90% of mega-mergers neglect owed to taste clashes and mediocre communication.

• If you’re reasoning astir retiring oregon cognize idiosyncratic who is, determination are 3 speedy questions causing galore Americans to recognize they tin discontinue earlier than expected. instrumentality 5 minutes to larn much here

Netflix (NASDAQ:NFLX) has officially clinched the blockbuster bidding warfare for Warner Bros. Discovery’s (NASDAQ:WBD) premium assets -- the Warner Bros. movie and TV studios and HBO Max streaming work -- successful an $82.7 cardinal cash-and-stock megadeal announced this morning, valued astatine $27.75 per share.

This caps weeks of jockeying for supremacy betwixt Netflix, Paramount Skydance (NASDAQ:PSKY) and Comcast (NASDAQ:CMCSA), wherever Paramount sought to acquire  the full institution including its cablegram channels similar CNN and TNT, portion Comcast followed Netflix successful zeroing successful connected the studios. With its ain immense cablegram offerings, it would invitation antitrust scrutiny if Comcast tried to get those assets too.

Netflix's winning bid, however, blends $23.25 per stock successful currency and $4.50 per stock successful Netflix stock, paving the mode for Warner Bros to rotation disconnected its cablegram assets successful Discovery Global, portion besides paying disconnected astir of its $40 cardinal successful debt. While Netflix gains ownership implicit premium assets, it besides introduces a level of hazard investors whitethorn not beryllium utilized to with the streamer, perchance dealing a crushing stroke to portfolios holding the stock.

Netflix was wide from the opening that it had zero involvement successful owning a declining plus similar cablegram TV channels. By acquiring lone the workplace and HBO Max, the streamer grabs the originative motor down the astir invaluable aspects of the business: Harry Potter, Game of Thrones, DC Comics, and HBO’s prestige library. In exchange, Warner Bros is capable to rotation disconnected a clean, focused, linear TV company.

For Netflix, the prize is enormous: instant ownership of immoderate of the world’s astir bankable IP, positive HBO Max’s 100 cardinal subscribers. There is undoubtedly immoderate overlap, but galore don't, and erstwhile combined with Netflix’s 300+ cardinal planetary accounts, the merger creates a important competitory moat.

It besides happens astatine an opportune clip for Netflix. Its ad-tier subscription and password-sharing crackdowns are supercharging monetization. In May, Netflix disclosed 94 cardinal monthly progressive users connected the advertisement tier  -- up from 70 cardinal six months anterior -- representing implicit fractional of caller sign-ups successful regions it was available.