While a deal may help Netflix to increase its competitive advantages & overall profitability in the long run on its good track record of monetizing quality content asset on its vast 300-million subscribers, a break up of this plan may boost its stock price in the near term. Especially if Warner Brothers chooses Paramount instead and pay the US$2.8 billion breakup fee to Netflix, its stock price may rebound and recover a good part of its recent plummet. Besides the US$2.8 billion breakup fee, Netflix could benefit from less worry that this deal locking up its balance-sheet and flexibility to explore other growth opportunities, financial pressure from US$72 billion or higher cost, time waste on political drama getting approval, & risk of lower-than-expected synergy.
Even if the deal is rejected by regulator and Netflix will have to pay Paramount US$5.8 billion breakup fee, Netflix stock price could benefit from less market concern on its financing pressure, time spent on fighting for approval, execution risk, etc. So, failing to buy Warner Brothers may boost its stock price to rebound strongly and benefit shareholders more in the short term.
