Like something right out of a hit evening TV show or blockbuster movie, Paramount Skydance (PSKY) chief David Ellison stepped further into the limelight Monday to throw his company’s hat in the ring in pursuit of Warner Bros. Discovery (WBD).
Like something right out of a hit evening TV show or blockbuster movie, Paramount Skydance (PSKY) chief David Ellison stepped further into the limelight Monday to throw his company’s hat in the ring in pursuit of Warner Bros. Discovery (WBD), which agreed to be acquired by Netflix (NFLX) in an $83 billion deal over the weekend. Ignoring the irony of movies/TV and potential Gordon Gekko/Wolf of Wall Street comparisons, the focus on today’s pulse will look to consolidate the flurry of information that has come out in recent days. PSKY usurped the Warner Bros. board and is trying to appeal to shareholders putting forth a higher acquisition price of $108 billion. PSKY executives have also noted their offer is to purchase Warner Bros. in its entirety versus the Netflix deal, which includes most of Warner Bros. sans the portfolio of cable channels that include the likes of CNN and TNT (Source: New York Times).
Paramount argues that Netflix’s acquisition of the proposed majority of Warner Bros. Discovery, which includes the movie studio and HBO streaming service, would face regulatory challenges as Netflix’s market share within streaming would increase further. Meanwhile, Netflix argues that regulators should view the new company as part of the broader entertainment industry, comparing itself to companies like Youtube, TikTok, Amazon, and Apple. Netflix’s CEO has also intervened, opining that the Paramount Skydance deal would cut jobs, while Netflix will create jobs. Netflix is currently the largest streaming company based on subscribers with roughly 300 million subscribers; compared to HBO Max (120 million subscribers) and Paramount (70 million subscribers). Raymond James noted that more than 70% of HBO Max customers in the US are also Netflix subscribers, though potential Paramount, HBO Max common subscribers were not noted. (Source: New York Times; BBC).
The initial deal and subsequent hostile takeover attempt have drawn much theatre (pun intended) on Wall Street and within the political realm due to some of the major players involved within the Paramount bid - Jared Kushner’s firm, Affinity Partners, along with other notables like the Saudi Private Investment Fund and Qatar Investment Authority. But to offer a differing, objective perspective and help weed out some of the noise the point and figure trend charts of the three companies involved are below.
Warner Bros. Discovery (WBD) – Media – WBD moved to a 5 for 5’er TA rating during the summer months prior to the deal finalizing. After a brief sell signal in early October, WBD returned to a buy signal in the latter part of the month at $21 before seeing shares move to recent rally highs at $28, marking the highest chart level since shares began trading in 2022. The recent rally places WBD in overbought territory and above the top of the 10-week trading band, typically a position that shorter-term holders would look to lock in profits. While investors wait for the final word on which deal WBD moves forward with, users should note that Netflix’s offering price is $23.25 per share, while Paramount Skydance’s is $30 per share. Current support on the default chart can be found at $17.50, while support closer to current prices can be found on the more sensitive 0.25 point per box chart at $22.75 and $22.
Netflix (NFLX) – Media – NFLX has maintained a long-term positive trend on its point and figure chart since May 2023, but the stock has been on a sell signal since July. After a fourth sell signal in the latter part of November at $106, shares have fallen to the mid-$90s with recent trading. Prior to the deal’s announcement, NFLX reversed into Os on its peer RS chart, which dropped the stock down to a 3 for 5’er for the first time since early-2024. NFLX remains a hold in most cases, but holders of the stock should note support at $95 and $90, while the bullish support line now resides at $85.
Paramount Skydance (PSKY) – While shares have only been trading since August, PSKY improved to a 3 for 5’er through September before returning to a sell signal in early October. Since then, PSKY saw its market RS chart reverse into Os in late October before action in the past few trading days brought the peer RS chart in Os along with a violation of the bullish support line on the default trend chart. PSKY is now a 0 for 5’er trading below prices seen in September. Support now resides at $13, while the chart low resides at $10.
