Netflix: A Most Improbable Outcome

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Netflix (NFLX +11.27%) has, in a turn of events that proves the universe has a rather peculiar sense of humor, decided not to acquire the studio and streaming operations of Warner Bros. Discovery (WBD 2.19%). It seems Paramount Skydance (PSKY +23.66%) presented an offer that Warner Bros. Discovery found…less objectionable. One suspects a great deal of paperwork was involved, and possibly some biscuits. (The biscuits are purely speculative, but one must always account for biscuits.)

The markets, naturally, reacted with the kind of illogical exuberance one might expect from a collection of algorithms and emotionally-driven humans. Netflix shares opened Friday up 11.6%, Warner Bros. stock dipped by a modest 2%, and Paramount soared a rather alarming 18%. All this shuffling of numbers added up to approximately $40 billion in market value. Which, when you think about it, is a lot of money. Enough to buy a small planet, probably. (Although the paperwork for that would be truly terrifying.)

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Netflix Dodges a $40 Billion Debt Bomb (or, A Brief Treatise on Financial Implausibility)

Was this the best outcome for Netflix? Well, “best” is a subjective term, isn’t it? From a perspective of galactic domination, perhaps not. But from the perspective of not being buried under a mountain of debt the size of Wales, it’s… decidedly more comfortable. Netflix had $9.0 billion in cash and $13.5 billion in long-term debt at the end of 2025. To finance the all-cash buyout bid, they’d have needed another $40 billion or so. That’s a lot of borrowing. (Imagine trying to explain that to your accountant. It would involve diagrams, and possibly a strong beverage.)

Instead, they walk away with a $2.8 billion breakup fee from Paramount. Which, let’s be honest, is a rather generous consolation prize. (It’s like being told you haven’t won the lottery, but here’s a perfectly good toaster.) A clean balance sheet, coupled with an extra $2.8 billion, seems, on balance, a sensible outcome. Especially for shareholders.

What Netflix Will Do With All That Cash (Or, The Content Production Paradox)

And the cash is going to be put to work, immediately. Netflix’s management has promised to invest $20 billion in content production this year, up from a previous commitment of $11.5 billion. The stock buyback program, which had been paused to conserve cash for the Warner Bros. deal, is back in action. (It’s a bit like deciding you’re not going to build a spaceship, so you’re going to buy back all the spare parts.)

The resumed buybacks strike me as a shrewdly opportunistic move. Netflix’s stock had a rather alarming drawdown of 43% from last summer’s peak, mostly due to concerns about the expensive buyout battle. Canceling shares at a discount seems, logically, a sensible idea. (Although one does wonder if the algorithms will notice. They’re terribly sensitive, you know.)

Netflix stock, even after Friday’s jump, still looks like a rather good deal. (It’s like finding a perfectly functional time machine in a charity shop. You should probably buy it.)

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2026-02-27 20:53