Netflix $NFLX ( ▲ 0.64% ) is suddenly the frontrunner to buy Warner Bros. Discovery $WBD ( ▲ 1.96% ) , but Wall Street is not celebrating with it. After second-round bids this week, reports say Netflix has pulled ahead of Comcast $CMCSA ( ▼ 2.35% ) and Paramount Skydance $PSKY ( ▲ 0.15% ) in the race to acquire WBD’s streaming and studio assets.
Investors are not convinced the deal would be transformational. Shares of Netflix are down again on Thursday after falling sharply on news that adding HBO Max might not give the company much additional market share, since many Netflix users already subscribe to HBO’s service.
Paramount is openly frustrated with how the process is unfolding. The company has reportedly submitted five bids and sent WBD a pointed letter questioning whether the sale process is “fair and adequate,” citing reports that WBD’s board prefers Netflix and is pushing back on Paramount’s advances.
Regulators loom large over any deal. Netflix could face more skepticism in Washington, which may favor Paramount’s pitch. Paramount appears confident enough to raise its proposed breakup fee to five billion dollars if its offer collapses during regulatory review.