Plot Twist in the Warner Bros Takeover
The Warner Bros. deal had an interesting plot twist! Larry Ellison is basically putting his and his family’s fortune on the line, while Netflix backed out. This is what happened.
Sup! 👋
I’m not gonna lie, this week’s issue was hard to write.
Many of my friends live in the Middle East, and for the past 48 hours, I was more glued to my phone screens or in group chats than actually focusing on the regular topics.
If you have any friends, family members, or online friends in that region, I hope they’re safe and that the world will be back to normal in a few weeks. At least I hope…
However, I find the process of writing these articles therapeutic and thought the entire Warner Bros. vs. Paramount/ Netflix saga too good to ignore.
So here’s a watered-down version of what happened. No worries, there are still some interesting takes and a few funny social media posts in there!
In the coming months, we will definitely have more clarity on the deal, and I will do a full breakdown then.
But for now, here is the latest development.
PS: If you enjoy this newsletter and believe your friends or family would too, a recommendation would be greatly appreciated!
Turns out, I was celebrating too early.
Back in December, I wrote about how Netflix won the Warner Bros. saga and how legacy media lost the streaming wars.
Well, the Ellisons had other plans.
Paramount Skydance outbid Netflix at $31 per share, valuing the whole thing at roughly $111 billion.
Netflix, which had locked in a deal for $27.75 per share back in December, decided not to match.
Can’t blame them. One can only offer something that, many times, becomes redundant.
Source: X
Here’s where it gets spicy.
Paramount’s financing package is roughly $45 to $46 billion in equity and more than $57 billion in debt.
Read that again. Fifty-seven billion in borrowed money.
Bank of America, Citigroup, and Apollo are on the hook for the debt financing, and Larry Ellison personally guaranteed $45.7 billion from his trust, backed by Oracle stock.
One of the world’s richest men is betting his personal fortune on a media conglomerate carrying more debt than most countries’ GDP.
The combined entity would carry a debt ratio of nearly 7 times its annual earnings, which is the kind of number that makes credit agencies sweat.
Paramount pledged to cut that down to 4.4 times earnings, meaning massive cost cuts from day one.
And there’s the quiet part I don’t read in any of the flashy economics papers.
Paramount isn’t putting up much of its own cash.
The whole deal is leveraged to the sky, with Apollo and Gulf state money backing it.
A free market purist might call this capital allocation. A skeptic would call it financial engineering with a prayer.
A shareholder vote is scheduled for 20 March, regulatory approval could take over a year, and state attorneys general are already lining up to challenge it.
Source: X
Netflix stock jumped almost 9% on the news. Investors were relieved they walked away.
That tells you everything.
Whether Paramount actually closes this deal, loaded with enough debt to sink a battleship, is a question for 2027. Maybe 2028.
On that note, good luck to the Ellisons and Paramount Skydance shareholders.
While I kept my main part for this week’s issue short, there were still some exciting things happening next to the Warner Bros. takeover.
The following pieces or links are Tabs Worth Opening.
What an AI cyberattack could look like: It’s been the week of AI doomsday posts, and I found this one by Axios entertaining and informative. But it doesn’t stop at one article; there are a few good takes in there.
Microsoft wants to store data on glass for 10,000 years: I’ve been enjoying Semafor recently, and this article caught my eye. In it, they mention how Microsoft has discovered a way to store data on borosilicate glass, a widely available and durable material, reliably for 10,000 years.
A great review about Perplexity Computer: I stumbled across this Substack in a group chat, and I must say, it’s one of the best reviews out there about Perplexity’s latest competitor for Claude Cowork. On that note, also follow Karo on Substack. She’s a great writer!
Notion launched custom AI agents: While I personally enjoy Obsidian over Notion, I think props are for their latest product launch. As a content guy, I especially enjoyed their launch video.
Your anonymous social media accounts are not safe from AI: ETH Zurich has released an LLM with built-in deanonymization, and it’s bad news for anyone who has an anonymous account. Time to pack it up or become better at hiding your writing tells.
And that’s a wrap for the eighth full issue of Internet Native Capital.
The whole Warner Bros. saga has everything you need for an HBO banger of a series.
Actually, scratch that! They should use this as the baseline for another season of Succession.
Picture this scene, late at night in a board room, everyone baffled by the latest numbers, then one of the Co-CEO’s of Netflix gets up, calls the Elisons, and says:
“Congratulations on saying the biggest number you fucking morons.”
That would be such a typical Logan Roy move.
Anyway, I’m again praising my love for a fictional moment in one of the best TV shows out there.
Back to everyday life.
See ya!