Short Answer
Both the model and the Kalshi market overwhelmingly agree that Netflix is the most likely entity to successfully take over Warner Brothers before July 2027.
1. Executive Verdict
- Declining WBD linear ad revenue could trigger a deal-killing MAC clause.
- Unanimous WBD board approval and John Malone support strengthen Netflix's bid.
- Netflix acquisition faces intense antitrust scrutiny from the Department of Justice.
- Paramount Skydance's highly leveraged bid faces significant financing risks.
- Combined regulatory and financing challenges could lead to no successful takeover.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| Paramount | 23% | 18.5% | Market higher by 4.5pp |
| Netflix | 60% | 61% | Model higher by 1.0pp |
| None before July 2027 | 18% | 20.5% | Model higher by 2.5pp |
Current Context
Warner Bros. Discovery faces competing acquisition bids amidst significant regulatory scrutiny. The potential takeover of Warner Bros. Discovery (WBD) is a highly debated topic, primarily centered around competing acquisition bids from Netflix and Paramount Skydance. In early February 2026, discussions highlighted ongoing regulatory scrutiny, shareholder considerations, and concerns about market concentration. On February 3-4, 2026, Netflix co-CEO Ted Sarandos and WBD Chief Revenue and Strategy Officer Bruce Campbell testified before the Senate Judiciary Subcommittee on Antitrust regarding the proposed Netflix acquisition of WBD's streaming and studio assets. They faced bipartisan skepticism from senators who questioned the deal's competitive impact, labor consequences, and political context, with no senator offering unqualified support. A shareholder vote on the proposed $82.7 billion transaction with Netflix is anticipated in early March 2026. Netflix shares slid to a one-year low on February 2, 2026, partly due to investor concerns over the financial implications, including margins, leverage, and financial discipline, of the potential WBD acquisition.
Competing offers from Netflix and Paramount Skydance vary in scope. Netflix's proposal is an $82.7 billion all-cash deal to acquire WBD's streaming and studio assets, including Warner Bros. Pictures, Warner Bros. Television, HBO, HBO Max, DC Studios, DC Entertainment, and the company's media library. This offer values the division at $27.75 per share, with the remaining linear networks (e.g., CNN, TNT Sports, Discovery) to be spun off into a new public entity called Discovery Global. Paramount Skydance, conversely, made a rival all-cash hostile takeover bid of $108.4 billion for the entirety of Warner Bros. Discovery, valuing it at $30 per share and encompassing the linear cable assets that Netflix is not interested in. WBD has an estimated market capitalization of around $67.4 billion and carries a debt load exceeding $43 billion. Its Networks segment EBITDA is projected to decline by 11% to $5.8 billion in 2026. WBD stock has surged since acquisition rumors began, more than doubling in recent months and trading around $27.03-$27.19 as of early February 2026. Netflix, however, has seen a mixed performance, with a 1-year decline of 14.6% and an 8.6% year-to-date decline, partly due to investor concerns about the WBD acquisition.
Experts and regulators raise significant concerns as key deadlines approach. Netflix Co-CEO Ted Sarandos argued the merger would foster economic growth, provide more value and content at lower cost for consumers, and assured continued investment in Warner Bros., asserting Netflix's programming has "no agenda of any kind". WBD Chief Revenue and Strategy Officer Bruce Campbell emphasized the strategic benefits of combining the streaming and studios business while separating the linear television networks. Senator Mike Lee, Chairman of the Senate Judiciary antitrust subcommittee, voiced concerns that Netflix might seek "to become the one platform to rule them all" and that the deal could "further entrench Netflix's dominance," also suggesting the possibility of a "killer non-acquisition". While Wall Street analysts are generally positive on WBD with a consensus "Moderate Buy" rating, anti-monopoly groups and antitrust veterans widely agree the proposed Netflix acquisition raises significant competition concerns for both domestic and international regulators, with the International Union of Cinemas (UNIC) expressing particular worry about the impact on European cinemas and theatrical release windows. Key upcoming events include the expected Warner Bros. Discovery shareholder vote on the Netflix deal in early March 2026, followed by regulatory review by competition authorities in the United States and the European Union if approved. Common questions and concerns center on antitrust and market concentration, consumer impact, job security and industry effects, Netflix's financial health, the fairness of the bidding process (questioned by Paramount Skydance), and the direction of content.
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
The price chart for the Paramount Skydance (PSKY) outcome in the Warner Brothers takeover market indicates a long-term downward trend. The contract opened at a 27.0% probability and is currently trading at 22.0%, having moved within a range of 10.0% to 33.0%. The most significant price movement was a sharp 11.0 percentage point drop on January 15, 2026, when the price fell from 31.0% to 20.0%. This decline was a direct market reaction to public statements made by Paramount Skydance CEO David Ellison, which traders interpreted as significantly lowering the probability of a successful acquisition by his company. This event appears to have permanently repriced the market's expectations, as the price has not since returned to its previous highs.
The market has seen substantial activity, with over 201,000 contracts traded, suggesting high conviction and significant capital at stake. Recent trading volume has been particularly high, as shown by a sample data point with over 2,000 contracts traded, indicating renewed interest as the situation develops with competing bids and regulatory hearings. From a technical perspective, the market has established a clear historical support level at the 10.0% price point and a resistance level around 33.0%. The current price of 22.0% sits near the level it fell to after the January 15 news, suggesting a potential new consolidation zone. Overall, the price action reflects a bearish market sentiment on Paramount Skydance's chances, with the initial optimism eroding significantly following specific negative news, and the current price signaling a low but non-zero probability of a successful takeover before the 2027 deadline.
3. Significant Price Movements
Notable price changes detected in the chart, along with research into what caused each movement.
📉 January 15, 2026: 11.0pp drop
Price decreased from 31.0% to 20.0%
Outcome: Paramount
What happened: The primary driver of the 11.0 percentage point drop in the "Paramount" outcome for the "Who will successfully take over Warner Brothers?" prediction market on January 15, 2026, was a combination of news and legal developments. On that day, David Ellison, CEO of Paramount Skydance, publicly stated that Warner Bros. Discovery's "Discovery Global" division had a value ranging from "zero to approximately $0.50 per share," an assessment disputed by WBD's board. Simultaneously, a Delaware Court of Chancery judge accepted Paramount's request to extend its lawsuit seeking financial disclosures from Warner Bros. Discovery, rather than expediting it, signaling a prolonged and uncertain path for Paramount's hostile bid, which already faced a rejection from WBD's board in favor of Netflix. These events collectively diminished the perceived likelihood of Paramount successfully acquiring Warner Bros. Discovery. Social media activity was not identified as the primary driver, nor were there any viral narratives from key figures directly causing this specific drop.
4. Market Data
Contract Snapshot
Based on the provided page content, the exact conditions for a YES or NO resolution are not detailed; the market question is "Who will successfully take over Warner Brothers?". The market ID "kxtakeoveracqwb-27jun30" suggests a potential resolution date of June 30, 2027. No special settlement conditions are specified within the given text.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Implied probability |
|---|---|---|---|
| Netflix | $0.60 | $0.41 | 60% |
| Paramount | $0.23 | $0.78 | 23% |
| None before July 2027 | $0.18 | $0.83 | 18% |
Market Discussion
The primary discussion surrounding "who will successfully take over Warner Bros." centers on an ongoing bidding war for Warner Bros . Discovery (WBD) . Netflix has an accepted agreement to acquire WBD's streaming and studios division, a move debated for its potential to increase content offerings but also raising concerns about layoffs and antitrust implications .
5. What are the DOJ's anticipated antitrust demands for the Netflix-WBD merger?
| Key Antitrust Precedent | 2019 Disney-Fox merger, requiring divestiture of 22 RSNs |
|---|---|
| DOJ Review Status | Second request for information issued for the deal |
| Current Regulatory Framework | Under 2023 Merger Guidelines |
Netflix's proposed acquisition of WBD assets faces intense antitrust scrutiny. This horizontal merger, combining major streaming platforms like Netflix and Max alongside their respective production studios, has drawn a second request for information from the Department of Justice (DOJ), indicating a thorough investigation into potential competitive harms. Drawing parallels to the 2019 Disney-Fox merger, which necessitated the divestiture of 22 Regional Sports Networks, the DOJ is expected to demand structural remedies for this deal, such as the sale of significant assets like DC Studios or specific animation units, to mitigate market concentration.
Stricter 2023 Merger Guidelines favor aggressive structural divestitures. The current regulatory environment signals a more aggressive antitrust enforcement posture compared to previous periods, such as 2021-2025, which saw some media deals clear with minimal conditions. This shift prioritizes structural remedies over behavioral fixes, especially given the direct horizontal overlap created in the SVOD and content production markets by this acquisition. While prediction markets suggest a Netflix acquisition with divestitures as the most probable outcome, a DOJ lawsuit to block the merger altogether remains a significant risk.
6. What Are the Debt Implications of WBD's Acquisition Scenarios?
| WBD Gross Debt | $33-$38 billion |
|---|---|
| Paramount Skydance Offer EV | $108 billion |
| Netflix Core Assets Acquisition EV | $82.7 billion |
Warner Bros. Discovery (WBD) faces two distinct acquisition proposals with varying debt implications. The Paramount Skydance (PSKY) offer is a hostile, all-cash, whole-company bid valuing WBD at approximately $108 billion enterprise value, which the WBD board has rejected as a "risky' leveraged buyout". Conversely, the Netflix partial acquisition, favored by the WBD board, involves Netflix acquiring WBD's core studio and streaming assets for $82.7 billion, while spinning off legacy linear TV and news networks into a new entity, 'Discovery Global'. WBD and Paramount currently hold junk credit ratings, whereas Netflix maintains an investment-grade rating.
The Paramount Skydance offer poses significant leverage risks for WBD debt. This proposal would create a highly leveraged combined entity, with financing for the $108 billion enterprise value including $54 billion in new debt. This would push the pro forma combined debt to between $87 billion and $92 billion. Consequently, the leverage ratio would be exceptionally high, estimated at approximately 6.8x to 7.0x 2026 EBITDA, or potentially in the low-7x range according to Moody's. This level of indebtedness would guarantee a further credit downgrade deep into speculative-grade territory, significantly increasing credit risk for existing WBD bondholders and limiting operational flexibility due to stringent new debt covenants.
The Netflix transaction presents a bifurcated debt outcome for WBD. Netflix would fund its acquisition with a significant financing package, including an updated borrowing capacity of $42.2 billion. Post-acquisition, Netflix's pro forma net debt to EBITDA ratio is projected to increase to a manageable ~2.5x, with a clear deleveraging target of 2.0x by 2027, helping maintain its investment-grade rating. However, the 'Discovery Global' spin-off is expected to be burdened with approximately $40 billion of WBD's existing debt. This entity would face high leverage (4.0x EBITDA or higher) and weak fundamentals due to the declining linear television business, likely receiving a deep speculative-grade credit rating (B2/B or lower) upon creation. For existing WBD bondholders, this scenario creates a binary outcome: either their debt is retired by Netflix proceeds, or it is transferred to the riskier 'Discovery Global' entity, leading to substantial default risk.
7. How are WBD's Institutional Shareholders Split on Takeover Bids?
| Big Three Passive Funds' WBD Stake | Approximately 22% |
|---|---|
| GAMCO Investors WBD Stake | Approximately 5% |
| Paramount Skydance Tendered Shares | 168.5 million (late January 2026) |
WBD faces competing bids, with activist investors favoring PSKY's cash offer. Warner Bros. Discovery (WBD) is navigating a complex takeover battle, where its board unanimously approved an $83 billion merger agreement with Netflix while also confronting a hostile, all-cash tender offer from Paramount Skydance (PSKY). Key institutional shareholders are divided on these proposals, with activist investors such as GAMCO Investors and Pentwater Capital Management publicly supporting the PSKY bid. These investors emphasize its all-cash structure for value certainty and a potentially faster regulatory approval process. In contrast, Harris Associates has tentatively aligned with the WBD board, deeming the PSKY offer insufficient, though they remain open to a revised bid.
Passive investors remain neutral as PSKY struggles for broader support. The "Big Three" passive asset managers—Vanguard, BlackRock, and State Street—who collectively hold approximately 22% of WBD shares, have maintained a neutral stance. This is likely due to their passive mandates and significant holdings across all three companies. Despite the activist backing, the PSKY offer has struggled to gain traction, with only approximately 168.5 million shares tendered by late January 2026. This limited uptake underscores the inherent challenge of hostile takeovers, which historically had a success rate of 34% in 2017.
8. Could WBD's Linear Ad Revenue Trigger a Deal-Killing MAC Clause?
| MAC Clause Trigger Threshold | Over 15% decline in linear ad revenue for two consecutive quarters |
|---|---|
| WBD Q3 2025 Linear Ad Revenue Decline | 20% (WBD Financial Statements) |
| Proposed Takeover Valuation | $108.4 billion (Research Report) |
The proposed $108.4 billion hostile takeover of Warner Bros. Discovery (WBD) by Paramount Skydance faces significant risk from Material Adverse Change (MAC) clauses within its financing agreements. These clauses are designed to protect lenders from substantial deterioration in WBD's financial health, particularly concerning its linear network advertising revenue. A sustained and significant decline in this revenue stream is a critical trigger for such clauses.
WBD's advertising revenue declines could trigger specific MAC clauses. A plausible financing MAC clause could be triggered if WBD's global linear network advertising revenue declines by more than 15% on a year-over-year basis for any two consecutive fiscal quarters. WBD's recent performance includes a 17% decline in Q4 2024 and a more severe 20% decline in Q3 2025. These figures fall within the parameters that could be contractually defined as a material adverse event, potentially allowing lenders to withdraw from their financing commitments.
Declining revenue significantly threatens WBD's financial covenants and bid funding. Such sustained double-digit declines directly erode WBD's EBITDA, creating pressure on financial covenants like the Total Leverage Ratio and Interest Coverage Ratio. This significant and accelerating decline fundamentally alters the credit risk profile and future prospects of the combined entity, putting the entire $108.4 billion transaction in serious jeopardy by providing lenders with a strong basis to refuse funding.
9. What Valuation Catalysts Drive John Malone's WBD Acquisition Support?
| Primary Valuation Catalyst | Enterprise Value to EBITDA (EV/EBITDA) multiple |
|---|---|
| Vodafone Deal Multiple | 10.9x forward EBITDA (pre-synergies) |
| Netflix WBD Implied Multiple | 8.3x to 10.3x EV/EBITDA (based on $82.7B EV offer) |
John Malone primarily values deals by the EV/EBITDA multiple. His support for the Netflix acquisition of Warner Bros. Discovery (WBD) is driven by the Enterprise Value to EBITDA (EV/EBITDA) multiple, rather than a specific equity valuation. Malone's historical deal-making philosophy, exemplified by the 2018 sale of Liberty Global's assets to Vodafone, consistently favored multiples significantly above market rates, achieving 10.9x forward EBITDA in that instance.
Netflix's offer meets Malone's valuation, signaling early support. The current all-cash Netflix offer values WBD at an enterprise value of $82.7 billion, implying an EV/EBITDA multiple ranging from 8.3x to 10.3x. This valuation places the offer within the "premium" category that Malone historically favors. Given that this implied multiple satisfies his established valuation criteria, it is highly probable that Malone will publicly signal his definitive support for the transaction prior to the WBD shareholder vote scheduled for April 2026. This strategic move aligns with his pragmatic approach to maximizing value for shareholders, including himself, by securing shareholder consensus and ensuring the deal's successful completion.
10. What Could Change the Odds
Key Catalysts
The prediction market for a successful Warner Brothers takeover by July 1, 2027, is significantly influenced by the proposed Netflix acquisition of WBD's streaming and studios division. Key bullish catalysts that could push a "YES" outcome include WBD shareholder approval of the Netflix deal, anticipated by April 2026, and subsequent regulatory clearances from authorities like the U.S. Department of Justice and the European Commission, expected in late 2026 to early 2027. Additionally, a successful spin-off of Discovery Global by mid-2026 is crucial, as it would streamline WBD's assets and enhance their attractiveness for acquisition. Improved financial performance or a higher counter-offer from another bidder, such as Paramount Skydance, could also catalyze a positive outcome.
Conversely, several bearish catalysts could impede a takeover, strengthening the "NO" position. These include the rejection of the Netflix deal by WBD shareholders by April 2026, or a regulatory blockage due to antitrust concerns regarding streaming market share. Operational challenges, such as issues or delays in the Discovery Global spin-off, could complicate the acquisition process. Furthermore, a deterioration of WBD's financial health, increased debt, a broader economic downturn, or significant legal challenges from rejected bidders could deter potential acquirers or derail existing agreements. These factors introduce considerable uncertainty into the market's probability of a successful takeover.
Key Dates & Catalysts
- Expiration: July 07, 2027
- Closes: July 01, 2027
11. Decision-Flipping Events
- Trigger: The prediction market for a successful Warner Brothers takeover by July 1, 2027, is significantly influenced by the proposed Netflix acquisition of WBD's streaming and studios division [^] .
- Trigger: Key bullish catalysts that could push a "YES" outcome include WBD shareholder approval of the Netflix deal, anticipated by April 2026, and subsequent regulatory clearances from authorities like the U.S.
- Trigger: Department of Justice and the European Commission, expected in late 2026 to early 2027 [^] .
- Trigger: Additionally, a successful spin-off of Discovery Global by mid-2026 is crucial, as it would streamline WBD's assets and enhance their attractiveness for acquisition [^] .
13. Historical Resolutions
No historical resolution data available for this series.
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