URGENT UPDATE: Wall Street traders are rapidly shifting their positions, anticipating a potential acquisition of Warner Bros. Discovery (WBD) by Netflix. Recent reports indicate that short interest in WBD stock has plummeted, suggesting increased confidence in the deal’s approval by U.S. and international regulators.
After months of high short interest—betting against the stock—traders are now backing off as WBD’s outlook transforms under CEO David Zaslav. The short interest has dropped to just 3% of the float, down from 6% in July, reflecting a surge in optimism surrounding the media giant.
For most of the year, WBD was viewed skeptically due to its significant debt and declining audiences for properties like CNN. However, Zaslav’s strategic moves, including rebranding the streaming service to HBO Max and producing successful films, have revitalized investor sentiment. Shares have rebounded from near penny stock levels to approximately $12.
According to analysis from S3 Partners, traders have covered 30 million shares in the past month alone, coinciding with Netflix’s recent victory in the bidding war over WBD, defeating offers from Paramount Skydance.
“The shorts have been steadily covering their positions as both companies claim to have regulatory issues under control,” stated Matthew Unterman from S3.
Despite the positive momentum, experts urge caution. The regulatory review process in the U.S. could extend over two years, and growing concerns among lawmakers about Netflix’s expanding market power could complicate matters. Similar apprehensions are echoed by officials in the EU and UK.
If the acquisition faces delays, short interest could rise again as traders speculate on the deal’s viability. Meanwhile, if Paramount remains interested, they may not maintain their current offer amid uncertainty.
Traders are advised to stay alert. As the market reacts to these developments, expect a fluctuation in short positions for WBD, potentially leading to a renewed wave of trading activity.
This rapidly evolving situation highlights the volatility in the entertainment sector and the high stakes involved as major players jostle for dominance in a changing landscape.
