Shares of Netflix were briefly under pressure as investors digested the streaming giant’s blockbuster agreement to acquire pieces of Warner Bros. Discovery , a move some say could weigh on the stock for some time despite long-term strategic upside. Netflix shares fluctuated between small gains and losses Friday after it announced a deal to buy WBD’s film studio and streaming service, HBO Max, bringing an end to a dramatic bidding process that saw Paramount Skydance and Comcast also vying for the legacy assets. Rich Greenfield, LightShed Partners co-founder, believes the economics of the transaction are likely to weigh on Netflix before they help in the long term. “Look, the math is going to hurt Netflix for a while. There’s no doubt,” Greenfield said Friday on CNBC’s “Squawk Box.” “This is expensive. They think this is accretive in year two. Obviously, we have to understand how they get there, but maybe it’s just that there’s so much stuff that they can turbocharge.” “This is a huge price, and I don’t see how Paramount can top this bid. This seems like a number that is just too big,” he added. The transaction is comprised of cash and stock and is valued at $27.75 per WBD share. The acquisition is expected to close in 12 to 18 months. Netflix has agreed to pay a $5.8 billion reverse breakup fee if the deal is not approved. Still, Greenfield noted that the long-term opportunity could be substantial if Netflix can unlock and scale the value of Warner’s vast intellectual property. “They are going to make a tremendous amount of content,” he said. “The amount of content that’s going to be made out of Warner Brothers library is gonna go up dramatically. There’s so much stuff collecting dust right now.” The historic deal brings together the streaming giant Netflix, which has upended the media industry in recent years, and the storied Warner Bros. film studio, known for its library including “The Wizard of Oz,” the Harry Potter franchise and the DC comics universe. It will also include the content of HBO Max, including “The Sopranos” and “Game of Thrones.”
