Liontree Weekly Update
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Liontree Weekly Update
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“Our LT Weekly Update is a comprehensive weekly analysis aimed at helping our key corporate and investor clients cut through the noise and stay in front of what we view as the most important themes and developments driving the digital economy.”
- Leslie Mallon, Head of LionTree Public Markets

Just as the week was winding down, it ended with a bang with Netflix’s announced acquisition of Warner Brothers (see ). In the background, the S&P 500 and Nasdaq posted modest gains, up +0.3% and +0.9%, respectively. Treasuries were weaker with yields higher across the curve. The Fed meeting next week will be the next main macro catalyst, with the markets now pricing in a ~90% chance of a 25bp cut.

Sector-wise, this edition delves into the below themes/developments:

Also please note that as we approach year-end, we’re refreshing our Top Themes report to bring you an updated look and feel. During this transition, we’ll be sharing our insights via Substack. **To ensure that you continue receiving the report without any interruption, please add liontreeweeklytopthemes@substack.com to your contacts.** Thank you for your patience – we’re excited to roll out the new format in the months ahead.

Have a good weekend.

Best,
Leslie

Leslie Mallon

Head of LionTree Public Markets

PH: +1-917-364-6778

A Winner Emerges As Netflix Annc’d The Acq Of Warner Brothers…But Is This The End Of It?

The suspense, intrigue, and twists & turns regarding what will happen with Warner Bros. Discovery and the major media juggernauts will certainly make for the next big docudrama! However, Netflix investors were not exactly thrilled with the Co finally agreeing to pay $27.75 per WBD share (subject to a collar) which would be a total consideration of $82.7bn EV. The $59bn that Netflix has lined up for financing is also one of the largest loans of its kind, per Bloomberg. The Co’s underlying thesis is that bringing these 2 assets together will make for a stronger company, as Netflix can leverage WB’s existing and new content across its subscriber distribution network and create new IP universes as well. There is also the opportunity for new streaming offers and bundles, which will create more engagement and retention.

But at least to start, the strategy for both Netflix’s core and WBD will remain basically the same. Netflix will continue to support WBD’s theatrical film distribution while Netflix originals will maintain its current selective approach theatrically.  There will be no change to Netflix’s sport strategy. HBO will also remain standalone.

Analysts and investors pushed back on the timing. Why now? Why not when WBD shares were trading at $6/share? Netflix mgmt said the assets simply were not for sale then and this is a “rare opportunity.” Executing on such a large transaction is also a concern, though Netflix has clearly done a great job evolving the Co over the years, since it first started as a DVD company.

But is this the end of it? Maybe not. CNBC reported that Paramount may be gearing up to make an offer directly to shareholders so there may be a sequel in the works! And down the road once the Discovery Global asset separates, consolidation is likely to come into play again.