Netflix Faces Unprecedented Debt Burden in Mega-Acquisition Bid

Shares of Netflix saw a modest pre-market gain to $95.35 on Friday, a rise of 1.34%. This movement followed the release of detailed financing plans for its proposed $82.7 billion acquisition of Warner Bros. Discovery. However, market analysts warn this optimism may be short-lived, as the deal would quintuple the streaming giant’s debt load. The situation is further complicated by a hostile counter-bid from Paramount Skydance, intensifying pressure on all parties involved.

A Drastic Financial Transformation

The financing structure for the potential merger reveals a staggering shift in Netflix’s financial profile. The company has secured bridge financing of up to $59 billion, intended to be replaced long-term by a combination of $25 billion in bonds and $20 billion in bank loans. This would cause the firm’s total debt to surge from its current level of $15 billion to approximately $75 billion.

Despite this massive leverage increase, Moody’s has affirmed Netflix’s A3 credit rating with a stable outlook. The agency cited the strong combined EBITDA potential post-merger. This move marks a fundamental evolution for Netflix, transitioning from a growth-focused tech company comfortable with debt to a heavily leveraged traditional media conglomerate—a stark pivot from its years-long strategy of organic expansion.

A Hostile Counteroffer Emerges

The acquisition battle escalated significantly on December 12. Paramount Skydance submitted an unsolicited, all-cash offer to acquire Warner Bros. Discovery for $108.4 billion. This bid, equating to $30 per share, substantially exceeds Netflix’s $82.7 billion proposal, which includes a stock component. A key strategic difference lies in the assets desired: Netflix aims to acquire only the studio and streaming divisions, planning to spin off the linear TV business, whereas Paramount’s offer is for the entire company.

The board of Warner Bros. Discovery now faces a critical decision: proceed with the signed agreement with Netflix or accept Paramount’s superior cash offer.

Should investors sell immediately? Or is it worth buying Netflix?

Mounting Regulatory and Legal Challenges

Legal hurdles are already forming. On December 9, an HBO subscriber filed a class-action lawsuit seeking to block the Netflix acquisition, alleging violations of the Clayton Antitrust Act. Political scrutiny is also mounting, with Senator Elizabeth Warren publicly expressing concerns over market concentration. A combined Netflix-Warner Bros. Discovery entity would command an estimated 30 to 40% of the subscription video-on-demand (SVOD) market. Even under a business-friendly administration, securing antitrust clearance is far from certain.

Analyst Sentiment Turns Cautious

In response to the heightened risks, analysts are adjusting their outlooks. Jefferies lowered its price target on Netflix shares from $150 to $134 on December 11, though it maintained a “Buy” rating. The firm acknowledged the long-term potential but highlighted near-term merger and acquisition risks. The consensus analyst rating currently stands at “Moderate Buy,” with an average price target of $131.

Investor anxiety has been palpable. Between December 2 and December 10, Netflix’s stock price fell by 15%, erasing roughly $40 billion in market capitalization. The fear of a “winner’s curse”—where the acquiring company overpays or overextends itself—is weighing heavily on the market.

Critical Days Ahead

The outcome of this high-stakes bidding war will likely be determined in the coming days. From a technical analysis perspective, Netflix’s stock is testing a key support zone between $92 and $94. A decisive break below this level could trigger further selling pressure. Investors await the company’s next quarterly earnings report, scheduled for January 20, 2026, for further financial clarity.