Paramount's Lawsuit: A Tactical Proxy Fight Catalyst

The clock is now ticking. Today, Paramount Skydance has launched a direct, time-sensitive assault on Warner Bros. Discovery's board, filing a lawsuit in Delaware Chancery Court and announcing plans to nominate its own slate of directors. This is a tactical move designed to force disclosure and initiate a shareholder battle, with the 2026 Annual Meeting just three weeks away.

The lawsuit is the first salvo. It demands that WBD disclose details of its $82.7 billion deal with Netflix, specifically asking for information on how the company valued the "stub equity" from the Global Networks spinoff and the basis for its "risk adjustment" of Paramount's $30-per-share offer. The goal is clear: to give WBD shareholders the information they need to decide whether to tender their shares into Paramount's offer.

This legal action is paired with a formal proxy fight. Paramount intends to nominate directors for election at the WBD 2026 Annual Meeting and will solicit proxies against the approval of the Netflix transaction. The company is acting before the "advance notice window" for that meeting opens, aiming to lock in its position early. It has also threatened to propose an amendment to WBD's bylaws to require shareholder approval for any separation of Global Networks.

This escalation follows WBD's board rejecting Paramount's amended offer just days ago. That offer, which included a $40 billion in equity personally guaranteed by Oracle's co-founder Larry Ellison, had been reiterated as superior to the Netflix deal. By filing suit and launching a proxy fight today, Paramount is turning up the pressure, forcing the issue into the open with a tight timeline.

The Tactical Setup: Tender Offer Expiry and Disclosure

The immediate pressure point is a hard deadline. Paramount's $30 per share tender offer expires on January 21, 2026. This creates a three-week window where the company must force a decision from WBD shareholders. The lawsuit is the tool to break the board's silence and make that decision easier for shareholders to make.

Paramount's legal argument hinges on a specific lack of disclosure. It is suing for what it calls "customary financial disclosure a board is supposed to provide shareholders", which WBD has allegedly failed to deliver. The suit demands details on how the board valued the overall Netflix transaction and, crucially, the basis for its "risk adjustment" of Paramount's $30-per-share offer. This adjustment is key; it's the mechanism WBD's board used to downgrade Paramount's bid to $27.75 per share in its recommendation. Without seeing the math behind it, shareholders are left in the dark.

If the court rules in Paramount's favor, the impact could be decisive. Forcing WBD to reveal the valuation of the cable spinoff (Global Networks) and the risk adjustment methodology would strip away a layer of opacity. The evidence suggests Paramount already believes the spinoff's value is "effectively worthless". If the court compels disclosure, it could expose that the $27.75 figure is based on a subjective and potentially inflated risk assessment, making the Netflix deal appear less attractive by comparison. This would directly fuel the shareholder vote Paramount is now preparing for.

Market Reaction and Key Levels

The market is reacting to the escalation, with WBD stock showing clear signs of stress. The shares are trading around $28.44, down roughly 3.6% over the past 20 days as the proxy fight and lawsuit news have taken hold. This recent decline follows a powerful 121% rally over the prior 120 days, a run that has lifted the stock from deep value into the mid-$20s. Yet even after that surge, WBD remains well below its 52-week high of $30, indicating the market still sees room for pressure.

The immediate technical level to watch is the current price zone. A break below the recent trading range, particularly a sustained move under $28.40, would signal that selling pressure from the proxy fight is gaining momentum. This level acts as a near-term support; a failure to hold it could invite further downside, especially if the court's disclosure order is delayed or if shareholder sentiment turns decisively against the Netflix deal.

For now, the setup is one of heightened volatility around a key decision point. The stock's recent choppiness and the tight timeline to the January 21 tender offer expiry mean that technical levels will be critical for traders navigating the event-driven turbulence.

Catalysts and Risks: What to Watch

The standoff now hinges on a series of near-term events that will either resolve the conflict or force a more decisive battle. The primary catalyst is a Delaware court ruling on Paramount's disclosure lawsuit. The company is asking the court to compel WBD to reveal the valuation of the cable spinoff and the basis for its risk adjustment. A favorable ruling, expected within weeks, would strip away a key layer of board opacity and directly fuel the shareholder vote Paramount is preparing for. The court's decision could make the $27.75 Netflix offer look less compelling by comparison.

The next major event is the opening of the advance notice window for WBD's 2026 Annual Meeting, which happens in three weeks. This is the formal stage for the proxy fight Paramount has announced. The company plans to nominate its own slate of directors and solicit proxies against the Netflix deal. The window sets a hard deadline for Paramount to lock in its position and begin campaigning. If the court has already ordered disclosure by then, it will give the company a powerful factual basis for its campaign.

The main risk, however, is that the lawsuit fails. If the Delaware Chancery Court rules against Paramount, the company's $30-per-share offer remains unchanged, and WBD's board stays intact. This would leave the current stalemate unresolved, potentially allowing the Netflix deal to proceed without the forced disclosure or shareholder pressure Paramount sought. The tender offer, which expires on January 21, would then be the final test. A failure to gain sufficient shareholder support by that date would likely end the hostile bid. For now, the setup is one of high-stakes timing, where the court's order and the meeting window are the critical next moves.