Money Stuff: A Bidding War for Warner Bros.

On Friday, after a fairly public auction process, the board of directors of Warner Bros. Discovery Inc. agreed to sell the company to Netflix Inc. In the deal, Warner shareholders would get three things:

• $23.25 per share in cash,
• $4.50 per share worth of Netflix stock, subject to a collar, [1] and
• stock in a new company called Discovery Global: Netflix would only buy Warner’s studio and streaming business (including HBO and various movie franchises), and Warner’s shareholders would keep an assortment of television networks, including CNN  Discovery. How much is that worth? We don’t know — the spinoff hasn’t happened yet — but CNBC reported that “Paramount’s executives and advisors valued the Discovery Global networks portfolio at close to $2 a share, based on its predicted trading multiple and estimated leverage ratio,” Bloomberg’s Lucas Shaw reports that “the company believes those networks are worth $3 to $4 a share,” and William Cohan notes that “Jessica Reif Ehrlich, a research analyst at Bank of America, has estimated that on a stand-alone basis, the Discovery Global business would trade at a minimum of $5 per share.”

So let’s say the total value is between $23.25 + $4.50 + $2 = $29.75 and $23.25 + $4.50 + $5 = $32.75.

And Warner shareholders will get that $29.75 or so in … 2027? “The transaction is expected to close in 12-18 months,” Warner and Netflix announced, and the long delay is obviously driven by concerns about antitrust review. Netflix and HBO are big streaming platforms, there are lots of competition worries about a big streamer acquiring the Warner movie properties, and it is all quite politically salient. “It is a big market share. It could be a problem,” President Donald Trump said about the deal. There is a real possibility that the deal won’t go through at all, and we’ll find out in like a year. If that happens, Warner will be back to square one, though Netflix will have to pay Warner a $5.8 billion breakup fee, a bit more than $2 per share and “one of the biggest breakup fees of all time.”

Given the timing and uncertainty, the market did not value this package quite at $29.75: Warner’s stock closed on Friday at $26.08 per share.

As I said, this deal was the conclusion of an auction for Warner, an auction kicked off when Paramount Skydance Corp. approached Warner. In September, Paramount offered to buy all of Warner (including the Discovery Global television assets) for $19 per share in a mix of cash and stock, [2] but by last week it was up to $30 per share, all in cash. 

So Warner’s board was deciding between (1) a cash offer worth $30 and (2) a cash-and-stock-and-spinoff offer worth somewhere between $29.75 and $32.75, give or take. There were other considerations:

• The Netflix deal has a lot of antitrust risk; the Paramount deal probably has less. “Paramount is highly confident in achieving expeditious regulatory clearance for its proposed offer, as it enhances competition and is pro-consumer,” says Paramount, though it would say that. Also Paramount is run by David Ellison, the son of Larry Ellison, the world’s second-richest person, and the Ellisons are close to Donald Trump. In the 2025 deal environment that matters a lot, though perhaps less than the Ellisons thought.
• The Paramount deal might have more financing risk. Netflix is giant, with a $400 billion market capitalization and committed financing from big banks, and should have no problem paying $80 billion or so for Warner. Paramount Skydance is a fraction of Netflix’s size; in fact, it is smaller than Warner, with an equity market capitalization of about $15 billion. On the plus side, Larry Ellison is the world’s second-richest person. Bloomberg’s Michelle Davis reports that “the Warner Bros. camp had doubts about how Paramount would pay for the company”: “Paramount’s offer included financing from Apollo Global Management Inc. and several Middle Eastern funds, and it had conveyed that its bid was fully backstopped by the Ellisons. Still, Warner Bros. executives were privately concerned about the certainty of the financing.”
• Paramount owns CBS, Warner (or its Discovery spinoff) owns CNN, and if you are a director concerned about the future of news, you might have various feelings about selling CNN to Paramount. I imagine this was not high on the board’s list, though.

Warner’s board took Netflix’s deal — with higher upside valuation, lower current cash, more regulatory and timing risk, but less financing risk — over Paramount’s. Paramount did not like this. Last week, even before the auction concluded, it sent Warner a letter of protest:

Warner Bros. “appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders,” the letter reads. The company has “embarked on a myopic process with a predetermined outcome that favors a single bidder.”

Warner picked Netflix anyway, and today Paramount escalated its fight:

Paramount Skydance Corp. launched a hostile takeover bid for Warner Bros. Discovery Inc. at $30 a share in cash on Monday, just days after the company agreed to a deal with Netflix Inc.

The bid tops Netflix’s offer of $27.75 in cash and stock. Paramount’s offer is for the entirety of Warner Bros., while Netflix is only interested in the Hollywood studios and streaming business.

“WBD shareholders deserve an opportunity to consider our superior all-cash offer for their shares in the entire company,” Paramount Chief Executive Officer David Ellison said in a statement on Monday. “Our public offer, which is on the same terms we provided to the Warner Bros. Discovery Board of Directors in private, provides superior value, and a more certain and quicker path to completion.”

Here is the tender offer. The financing is described on pages 31 to 34; it includes a $54 billion debt commitment from Bank of America, Citigroup and Apollo and a $40.4 billion equity commitment from Larry Ellison’s trust. He’s probably good for it:

The Ellison Trust has financial resources well in excess of what would be required to meet its financial obligations under the Equity Commitment Letter, including, among many other assets and financial resources available to it, record and beneficial ownership of approximately 1.16 billion shares of Oracle stock with a market value of approximately $252 billion as of the date of this Offer to Purchase. 

Warner’s stock opened up about 6% this morning, at $27.64, suggesting that shareholders were happy about this. 

This is the same deal that Paramount already offered to Warner’s board, which the board rejected. My general sense in situations like this is that shareholders like cash and certainty, while boards of directors are more willing to put weight on somewhat speculative ideas of long-term value. “Though Paramount offered Warner a higher price per share than Netflix did,” the Wall Street Journal reported on Friday, “Warner saw Netflix’s deal as the superior one given that Warner shareholders would continue to own shares in both companies following its planned split.” Warner’s existing management and directors naturally think it’s a good company; they tend to think that the stub of Discovery Global is valuable, and that the continuing ownership of Netflix/Warner has some upside. Thirty dollars in cash is just $30 in cash; why not reach for something more? Whereas for the shareholders $30 in cash is worth more than, well, again, the stock closed at $26.08 on Friday.

Anyway we are now in Round 2 of the auction, the messier and more public part. If Warner’s shareholders want to take the Paramount deal, there’s not too much that Warner’s board can do to stop them: There are various defense mechanisms (poison pills, big reverse breakup fees) that Warner could put in place to protect the Netflix deal, but they would all lead to lawsuits.

The best defense of the Netflix deal is pretty much: more money. Netflix’s stock fell when the deal was announced on Friday, suggesting that Netflix shareholders don’t love it; it fell further this morning, suggesting that Netflix shareholders (1) still don’t love it and (2) think that Netflix will be raising its bid. And David Ellison said on CNBC today that “he told [Warner Chief Executive Officer David] Zaslav via text message that $30 per share wasn’t the company’s best and final offer,” so presumably Paramount will be raising its bid too.

The US government was “shut down” from Oct. 1 to Nov. 12, 2025. A government “shutdown” is a term of art; it’s not like the army went home or the prisons released everyone. But Congress had not appropriated money to keep paying for the government, and the result was that many government services were paused, many government employees were furloughed, etc.

If you take the term “shutdown” literally, though, you might get to thinking weird thoughts. “The US had no federal government for six weeks this fall,” you might think, incorrectly but sort of plausibly. If you are a Money Stuff reader, you might go on to think: “And therefore, for six weeks, securities fraud was legal.”

I mean, that’s not legal advice, and I doubt that too many of you had that thought. But! On Nov. 7, [3] the US Securities and Exchange Commission brought a securities fraud case against a guy named Srinivas Koneru. Koneru was the founder and owner of a private trade finance platform called Triterras Fintech Pte. Ltd., which he took public by a merger with a special purpose acquisition company in November 2020, at the height of the SPAC boom. As is standard in SPAC mergers, Triterras essentially went public at $10 per share; it traded as high as $14.42 in December 2020, but by early 2022 it was below $2 and by mid-2023 it was considerably below $0.01. Ultimately Koneru and some affiliates took it private again at $0.10 per share, a 99% loss for the public investors, which I guess is not that weird for a 2020-vintage SPAC deal.

Also not weird for a 2020-vintage SPAC deal is that the SEC now says that the SPAC merger disclosures were misleading in various ways, “leaving investors with a false impression of the extent to which the demand for [Triterras’s] Trade Finance module had been proven.” The SEC does not argue that the financial statements were misleading, exactly, just that the company overstated how much real activity was happening on the platform. It’s not the most slam-dunk fraud case you’ll ever see, but “company went public at $10 and private again at $0.10” does suggest that investors might have been misled.

There is a problem, though:

1. The statute of limitations for SEC securities fraud lawsuits is generally five years: The SEC has to sue within five years of the fraud, which here let’s say happened in November 2020, at the time of the SPAC deal.
2. The SEC tends to wait to the last minute to bring cases, which I find annoying but also understandable. (Everyone waits to the last minute to do everything.) Therefore, you’d expect the SEC to bring this case in, you know, October or November of 2025.
3. The government was shut down, then, though.

The SEC brought the case anyway, despite being shut down, and a few weeks later Koneru sued the SEC, arguing that it was illegal for the SEC to bring a case during the shutdown:

The Securities and Exchange Commission’s investigation of Srinivas Koneru over several years didn’t involve any emergency threat to human life or property that would justify continuing the probe during the shutdown under the Anti-Deficiency Act, the former executive of Triterras Inc. said in a complaint filed Sunday in the US District Court for the District of Columbia.

Koneru further alleged the SEC violated its own shutdown contingency plan by engaging in non-emergency activities such as reviewing his response to a Wells notice, holding internal meetings, and filing a civil complaint against him on Nov. 7 in the US District Court for the Southern District of New York.

Here is the complaint, which lists various bits of routine work that the SEC did to get this case filed during the shutdown, all of which are allegedly illegal:

[SEC enforcement lawyer Sam] Waldon and the Director of Enforcement — and based on information and belief, other staff members — engaged in internal discussions about the matter. … Those actions violated the Anti-Deficiency Act. …

The staff presented its investigation to the Commission. The Commission generally does not authorize the filing of a lawsuit against a respondent without a presentation and action memorandum from the staff, all of which would have been created in violation of the Anti-Deficiency Act. The staff filed its lawsuit on November 7, 2025, and so, therefore, the staff must have presented its investigation and action memorandum to the Commission at some point between October 24, 2025, and that date. Again, this presentation related to a routine, non-emergency investigation, violating the Anti-Deficiency Act.

The Anti-Deficiency Act actually does prohibit government employees from working for free during a shutdown, with some exceptions. I am not convinced that it creates a private right of action — I am not convinced that, if the SEC broke the rules and did some free work to sue you for securities fraud, the remedy is that you can’t be sued for securities fraud — but, you know, (1) worth a shot and (2) kind of an amusing case to bring. 

I should be clear, though, that the lesson here is not “you can go ahead and do securities fraud when the SEC is shut down.” The lesson here is “you can go ahead and do securities fraud five years before the SEC is shut down.” (Not legal advice!) It’s not easy to get the timing right.

You know who absolutely did not run into any Anti-Deficiency Act problems? The US Consumer Financial Protection Bureau, which still exists and employs hundreds of people, but which the Trump administration wants to shut down. So meanwhile those people twiddle their thumbs. The Wall Street Journal has kind of a sad profile of what they’re up to:

John Thompson had been working at the Consumer Financial Protection Bureau for over a decade when he and his colleagues were abruptly ordered to halt work. It was February, and the Trump administration was back in charge. ...

“I’d log on, check my email, make sure I did my mandatory training, and then I would go work in the yard,” said Thompson, an attorney who spent years at the bureau investigating predatory payday and auto title lenders. 

He eventually left for the private sector.

I write occasionally, even now, about the circa-2021 craze for nonfungible tokens, and every time I do I worry that no one will believe me. “Wait people bought paintings, burned them to ashes, and then sold a digital pointer to a video of the ashes for more than the painting was worth? What? Why?” And I’ll have to be like “I’m not saying it made any sense, it was nuts even at the time, I’m just saying it happened.” I barely believe it myself.

By 2027 I will occasionally mention digital asset treasury companies, and there will be the same shock of disbelief. “Wait, people would put $100 million of Bitcoin in a pot and sell shares of the pot for $200 million? What? Why would anyone buy that?” And I’ll have to be like “yeah no I hear you, it was nuts even at the time, I’m just saying it happened.”

Anyway here’s Bloomberg’s Monique Mulima on the rise and fall of DATs:

An array of public companies thought they had found a sort of perpetual motion machine: Use your corporate cash to buy up Bitcoin or other digital tokens and presto, your share price shot up even more than the value of the tokens you bought. …

One prominent entrant, SharpLink Gaming Inc., soared over 2,600% in a matter of days as the company said it would pivot from its old work in gaming, and sell shares to buy up lots and lots of Ethereum tokens, with one of Ethereum’s co-founders as the chairman.

But it was always hard to explain why tokens should be worth more just because they were held by a public company, and the wheels began to come off the car, at first slowly and then much more quickly.

In the case of SharpLink, the stock has fallen 86% from its peak, leaving the whole company worth less than the digital tokens it owns. The company now trades at roughly 0.9 times its Ether holdings. It was, at least, spared the fate of Greenlane Holdings, which plunged more than 99% this year, despite its stash of around $48 million BERA crypto tokens. …

Among the US and Canadian-listed companies that became DATs, the median stock price has fallen 43% this year, according to data compiled by Bloomberg. Bitcoin, by comparison, is down around just 6% since the beginning of the year.

I feel like one thing that crypto is good at is creating bubbles that are obvious at the time, yet hard to short. “This thing is trading above its fundamental value, so I should short it” is sometimes a useful heuristic, but pretty hair-raising in a world where “this thing is trading above its fundamental value so it will probably go up more” is also sometimes a useful heuristic. The DAT thing really was nuts at the time! Yet it worked, for a while.

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