Regulatory Scrutiny Clouds Netflix’s Major Acquisition Ambitions

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Netflix's ambitious strategy to reshape the streaming landscape through a proposed $82.7 billion acquisition of Warner Bros. Discovery has hit a significant regulatory speed bump. The U.S. Department of Justice (DOJ) has initiated a formal antitrust investigation into the deal, casting immediate uncertainty over its completion and unsettling investors.

Market reaction was swift. Netflix shares closed Friday's trading session at $82.06, reflecting a decline of approximately 11% over the preceding four weeks. Reports that the DOJ is issuing subpoenas to competitors for information have further intensified pressure on the stock.

The core of the regulatory probe centers on whether the merger would substantially lessen competition within the media sector. Investigators are reportedly examining potential exclusionary conduct. Should the transaction proceed, Netflix would consolidate its global subscriber base of roughly 325 million with Warner's extensive content library and an additional 125 million subscribers.

Critics of the deal contend the combined entity could command nearly half of the subscription video-on-demand (SVOD) market. Netflix counters this argument by stating the merged company would represent only about 10% of total U.S. television viewing time. The streaming giant maintains the acquisition is necessary to compete effectively against large technology firms and traditional linear television. Regulatory momentum was bolstered by a Senate hearing on antitrust law held earlier in the week.

A Rival Bid and Substantial Financial Stakes

Complicating the situation is a competing hostile offer. Paramount Skydance Corp has reportedly bid approximately $77.9 billion for Warner Bros. Discovery. Paramount is pushing for expedited regulatory review of its own proposal, aiming to persuade Warner shareholders to accept a deal it views as facing fewer antitrust obstacles.

The financial commitment for Netflix is substantial and clear. The company has paused its share repurchase program to preserve liquidity for an all-cash transaction. Furthermore, should the deal collapse due to regulatory opposition, a breakup fee estimated at around $5.8 billion could be triggered.

• DOJ antitrust review targets Netflix's $82.7B Warner Bros. Discovery bid
• Share price: $82.06 (Friday close), down ~11% over one month
• Potential breakup fee: ~$5.8 billion
• Netflix global subscribers: ~325 million

Valuation Perspective: Fundamentals Versus Deal Risk

Despite the regulatory overhang, the valuation picture presents a mixed signal. With a price-to-earnings ratio of about 32, the equity currently trades below its five-year average, according to source data. Looking ahead, Netflix has projected revenue growth of 12% to 14% for 2026, alongside an expectation to double its advertising revenue next year.

In the near term, however, the DOJ's stance remains the primary driver for the stock. The fact that shares trade significantly below their 52-week high of $134.12 indicates the market is already pricing in considerable uncertainty—primarily regarding whether regulators will approve the acquisition in its current form.