One of the biggest surprises in quite a while hit as the deal to buy entertainment giant Warner Bros. Discovery (WBD) continued to unfold. No less than Mario Gabelli—who was heavily involved in the deal between Paramount and Skydance that ultimately produced Paramount Skydance (PSKY)—emerged to call on Netflix (NFLX) to revise its bid. The move sent Warner shares surging, adding over 3.5% in the closing minutes of Monday’s trading.
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Gabelli, the CEO of GAMCO Investors and a holder of Warner shares, called on Netflix to “…simplify structure…and increase cash portion…” on its bid. Gabelli pointed out that “…tax issues such as basis allocation for taxable holders needs focus.”
Gabelli’s call to Netflix comes at an important time for Warner, and for the deal itself. With Paramount refining its own offer, and also noting that a major portion of the bid—$40.4 billion—would be personally guaranteed by Larry Ellison himself, the offer from Paramount likely looks a lot more attractive than it did. Especially with Paramount eager to get hands on the whole Warner operation, not just the studios and streaming operations like Netflix wants.
Congress Gets Involved
Further, there are growing signs of discontent in Washington about a Warner deal with Netflix. However, these signs are not likely to grow as far as they might. Reports suggest that hearings are already being prepared, but the legislation required to stop the deal outright is “…very likely out of reach,” noted one report.
Hearing plans are already in the works, with both Sen. Cory Booker (D-N.J.) and Sen. Mike Lee (R-Utah) setting up said plans. Similar plans are also starting up in the House of Representatives. Though the hearings will likely bog down the deal, and make it take longer to go through, legislation required to stop the deal outright will be a long shot at best, according to multiple sources.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on seven Buys and 13 Holds assigned in the past three months, as indicated by the graphic below. After a 166% rally in its share price over the past year, the average WBD price target of $23.61 per share implies 17.89% downside risk.
