Regulatory Scrutiny Weighs on Netflix Shares Amid Major Acquisition Plans

Shares of streaming leader Netflix are facing pressure as its proposed $83 billion acquisition of Warner Bros. Discovery (WBD) draws critical attention from U.S. lawmakers. The stock's decline reflects growing investor anxiety over potential regulatory obstacles that could complicate the mega-deal.

Despite the market's focus on the acquisition, Netflix's underlying business remains robust. The company reported fourth-quarter 2025 revenue of $12.05 billion, a 17.6% year-over-year increase, supported by a global subscriber base exceeding 325 million accounts.

To secure the necessary liquidity for the transaction, Netflix has temporarily suspended its share buyback program. Furthermore, in a strategic shift from its initial proposal, the company revised its offer in January to an all-cash bid. This move was designed to counter a competing hostile takeover attempt for WBD by Paramount Skydance. The financial implications of the deal are already materializing, with Netflix anticipating approximately $275 million in transaction-related costs for 2026. Combined with the prevailing uncertainty, these factors contributed to an 11% slide in the share price during January alone.

Senate Hearing Puts Market Power in Focus

During a contentious hearing before the Senate Judiciary Committee, Netflix Co-CEO Ted Sarandos defended the proposed merger. He argued that the combination would enhance competition against dominant tech platforms like YouTube and Amazon, rather than diminish it. Sarandos emphasized that the deal is distinct from traditional media mergers because it would allow Netflix to acquire assets it currently lacks.

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Senators, however, expressed skepticism. Senator Mike Lee challenged the direct comparison to YouTube, questioning whether blockbuster films truly compete with short-form online video clips. In response, Sarandos presented the concept of a "zero-sum game" for viewer attention, positing that every minute spent on YouTube is a minute lost to streaming services. He cited Nielsen data indicating the combined entity would capture 10.4% of total TV viewing time, bringing it close to YouTube's 12.7% share.

The Path Forward: Shareholder Vote and Antitrust Review

The next critical milestone is scheduled for March, when Warner Bros. Discovery shareholders are set to vote on Netflix's offer. Meanwhile, the transaction's fate largely depends on a review by the U.S. Department of Justice, with preliminary discussions already underway.

In an effort to address concerns, Sarandos made a public commitment to theatrical releases, pledging that films would have an exclusive 45-day window in cinemas before becoming available for streaming. Nonetheless, this concession may not be sufficient to ease regulatory fears. Adding another layer of complexity, WBD must complete the spin-off of its cable division—which includes networks like CNN and TNT—into a new entity dubbed "Discovery Global." This intricate process is expected to take six to nine months, prolonging the period of risk for investors awaiting final approval.