Dec. 9 at 11:00 PM
$PSKY $WBD $NFLX Barron’s Just Confirmed the Core Risk: Netflix Is Overextended Strengthening Paramount Skydance’s Position in the WBD Race
The latest Barron’s report is a must-read for anyone following the Warner Bros. Discovery bidding war because it makes one thing brutally clear:
Netflix is financially overstretching itself, and the debt markets are sounding the alarm.
Independent bond-research firm Gimme Credit downgraded Netflix’s debt to Underperform, stating plainly:
“Netflix is stretching itself with its planned acquisition of Warner Bros. Discovery.”
Here’s the math that has Wall Street worried:
• Netflix must pay ~
$72B for WBD equity
• Assume ~
$11B of WBD debt
• Raise ~
$50B of NEW debt
• Total economic burden: ~
$133 billion
This drives Netflix’s leverage from 1.1× EBITDA to over 4×, far above the 3× ceiling that investment-grade companies target.
Barron’s quotes Gimme Credit directly:
“Buying Warner Bros. Discovery increases Netflix’s debt-to-Ebitda ratio to over four times… exceeding the three times typically sought for investment-grade ratings.”
That alone is enough for a downgrade, but the risk compounds further when Barron’s adds:
“If Netflix wins the battle, the immediate impact is decidedly negative.”
Why? Because Netflix also plans to continue share buybacks, forcing a contradiction: deleveraging and repurchasing stock and absorbing WBD debt.
Mathematically impossible.
Meanwhile, Barron’s highlights PSKY as the financially superior bidder:
“There is a good possibility that either the Netflix transaction does not get approved, or that Paramount ultimately prevails, given its hefty backing by Ellison family money.”
In other words: PSKY’s structure strengthens the deal. Netflix’s structure breaks it. Bond markets don’t lie and today they’re warning the entire industry: The Warner deal is far riskier for Netflix than for PSKY.
https://www.barrons.com/articles/netflix-stock-price-warner-bros-debt-d221112e
