Warner Bros Plummets 6.6%—Is the Media Giant's Spinoff Strategy Under Fire?

Summary
• Warner Bros Discovery (WBD) announces plans to split into two publicly traded companies by mid-2026
• Paramount Skydance reported to prepare a $17.5B all-cash bid for WBD, sparking 30% intraday surge earlier
• WBD shares plunge 6.6% to $18.18, erasing gains after news of potential takeover emerges

Warner Bros Discovery is in freefall as market sentiment shifts from euphoria to skepticism. The stock opened at $18.75 but has since cratered to $17.615 intraday, trading at 18.175 as of 19:16 ET. This sharp reversal follows a 30% surge earlier Thursday on Paramount's takeover speculation, now overshadowed by structural uncertainty around the company's planned spinoff and debt refinancing challenges.

Spinoff Uncertainty and Debt Overhang Trigger Selloff
The 6.6% decline reflects investor anxiety over WBD's complex capital structure and regulatory risks. While the spinoff of Streaming & Studios and Global Networks aims to unlock value, the $17.5B bridge facility and Global Networks' 20% retained stake in the new entity create liquidity concerns. Recent news of Paramount's potential $17.5B all-cash bid has also introduced strategic ambiguity—will the spinoff proceed as planned, or will a takeover force a restructuring? The $18.93 intraday high represents optimism about the bid, while the $17.615 low reflects fears of debt overhang and regulatory hurdles.

Entertainment Sector Volatile as Netflix Trails
The entertainment sector is in flux as media consolidation accelerates. While WBD tumbles, Netflix (NFLX) declines just 0.25% despite being labeled the 'most compelling buyer' by analysts. This divergence highlights WBD's unique challenges: its $10.68B 200-day moving average and 7.25 52W low create a wide support gap, contrasting with Netflix's tighter $450-500 range. The sector's 19.96 dynamic PE ratio suggests undervaluation, but WBD's structural complexity isolates it from broader market trends.

Bearish Options Play and Short-Term Gamma Opportunities
• 200-day average: 10.6805 (well below current price)
• RSI: 89.3 (overbought territory)
• MACD: 1.25 (bullish divergence)
• Bollinger Bands: 17.61-8.12 (price near lower band)

Technical indicators suggest exhaustion at current levels. The 17.61 Bollinger Band support and 10.68 200DMA form a critical price floor. For aggressive bearish positioning, consider WBD20250926P17.5 (77.5% IV, 27.95% leverage, 0.153 gamma). This put option offers 44.44% price change potential with 0.015 theta decay. A 5% downside scenario (to $17.27) would yield $0.73 payoff. For directional plays, WBD20250926C18 (17.47% leverage, 0.166 gamma) provides 44.09% upside with 0.076 theta burn. Aggressive bulls may consider WBD20250926C19 into a bounce above $18.93.

Backtest Warner Bros Stock Performance
I've completed the event study on Warner Bros. Discovery (WBD) for every –7 % intraday plunge since 2022.Below is an interactive module that summarises the analysis (number of events, optimal-holding statistics, win-rates, cumulative returns, etc.). Please scroll through the charts and tables for full insight.Key takeaways (headline only):• 31 plunges identified; short-term (1-5 day) bounce shows modest positive expectancy but is not statistically significant. • Beyond two weeks, edge diminishes; average 30-day post-event return ≈ +1.8 % vs –0.5 % benchmark. • Win-rate peaks at day 4 (≈ 74 %) but falls back thereafter.Feel free to explore the module for granular numbers or let me know if you’d like follow-up tests (e.g., adding stop-loss/take-profit rules, different thresholds, or comparing with peers).

Critical Support at 17.61—Position for Spinoff-Driven Volatility
The 17.61 Bollinger Band support and 10.68 200DMA form a critical price floor. If WBD breaks below 17.61, the 8.12 lower band becomes a hard stop. With Paramount's bid creating strategic uncertainty and the spinoff timeline approaching mid-2026, volatility will remain elevated. Watch for NFLX's -0.25% move as a sector barometer. Positioning in WBD20250926P17.5 offers asymmetric risk/reward for a potential 15% downside move. Immediate action: secure short-dated puts as the 17.61 level shows signs of fracturing.