Paramount's Proxy Fight: A Tactical Move or a Value Trap?

Paramount Skydance has launched a high-stakes, two-pronged offensive against Warner Bros. Discovery. The immediate catalyst is a Monday filing of a lawsuit in Delaware court seeking disclosure of information from WBD, coupled with the announcement of a proxy fight to nominate its own slate of directors for WBD's 2026 annual meeting.

This is a tactical escalation, not a fundamental shift. The legal action targets WBD's board, alleging it breached its disclosure duties by failing to provide full information about the Netflix deal. Paramount's stated goal is to give shareholders the data needed to evaluate competing offers, but it explicitly stopped short of asking the court to block the Netflix deal. Simultaneously, the proxy fight aims to reshape the board that has twice rejected Paramount's $30-per-share bid, hoping to rally investor support for its rival transaction.

The core thesis is that these moves are costly and risky gambits to pressure WBD's board. They do not change the fundamental valuation gap between the bids. WBD has dismissed Paramount's campaign as a distract, noting that despite six weeks of pressure, Paramount has yet to raise the price of its offer. The lawsuit and proxy fight are aggressive tools to force a reconsideration, but they are high-wire acts that could backfire if they fail to sway shareholders or if courts rule against Paramount.

The Valuation Math: A $30 vs. $27.75 Standoff

The core of this proxy fight is a stark financial standoff. Paramount is offering $30 per share for the entire Warner Bros. Discovery company, a bid valued at roughly $108.4 billion. That's a full acquisition, including all of WBD's assets. By contrast, Netflix's competing offer is a partial acquisition of just Warner's streaming and studios, valued at $82.7 billion enterprise and priced at $27.75 per share.

The key difference is what's excluded. Netflix's deal does not include the cable channels that make up WBD's Global Networks division. Paramount's offer, however, encompasses the entire company. This creates a fundamental apples-to-oranges comparison. WBD's board has consistently rejected Paramount's bid, calling it deficient and citing its numerous and obvious deficiencies. The board's stance is that the Netflix deal, despite its lower per-share price, is superior because it provides a clear path to unlocking value for shareholders through a spin-off of Discovery Global, which is expected to be completed in the third quarter of 2026.

For now, the math is a stalemate. Paramount has yet to raise its price, a fact WBD highlights as evidence of the offer's weakness. The proxy fight and lawsuit are attempts to pressure the board into re-evaluating, but they do not change the underlying valuation gap. The battle is over which package-full control at $30 or a partial stake at $27.75 plus a future spin-off-represents better value for WBD's shareholders.

The Tactical Setup: Cost, Timing, and Shareholder Leverage

The immediate risk/reward for investors hinges on a tight timeline and a costly campaign. Paramount's leverage is clear: WBD shareholders have until January 21 to tender their shares under Paramount's $30 offer. That deadline is a critical pressure point, forcing shareholders to act before the proxy fight intensifies.

Yet the proxy fight itself is a high-cost gamble. Paramount must convince shareholders to vote against the Netflix deal and for its own board slate. This is an uncertain and expensive campaign, as noted in the evidence. Success is not guaranteed, and the board's rejection of Paramount's bid as inadequate and overly leveraged suggests the fight will be tough.

The Netflix deal's closing is contingent on a longer timeline, which creates a strategic window. The transaction is expected to close after the previously announced separation of WBD's Global Networks division, Discovery Global, now expected in the third quarter of 2026. This spin-off delay means the conflict is not a near-term decision but a battle that will unfold over months. For now, the setup is a costly, time-sensitive push by Paramount to sway investors before the January 21 tender deadline and through the extended proxy fight, all while Netflix's deal moves forward on its own, longer path.

Catalysts and Risks: What to Watch

The immediate test for Paramount's campaign is whether it can create a mispricing or if it will simply fail to move the needle. The setup is a race against two key deadlines, with the primary risk being a costly stalemate.

First, watch for any price increase from Paramount. WBD has explicitly noted that Paramount has yet to raise the price of its offer. This lack of movement is a critical vulnerability. If Paramount cannot or will not sweeten its $30-per-share bid, it struggles to close the perceived value gap with Netflix's package, especially given the spin-off of Discovery Global. Any increase would be a necessary signal of conviction, but its absence so far suggests the offer's fundamental flaws remain unaddressed.

Second, the outcome of the January 21 tender offer deadline and the subsequent shareholder voting on Paramount's proxy slate will be decisive. The lawsuit and proxy fight are designed to pressure shareholders into tendering their shares before the board can solidify support for Netflix. Success requires Paramount to win a significant number of votes to replace the board, a tough ask given WBD's characterization of the campaign as a distract.

The primary risk is that the proxy fight fails. In that scenario, Paramount's $30-per-share offer would be left on the table while the Netflix deal proceeds on its longer path. The campaign would have consumed resources and generated negative publicity without altering the outcome. The board's unanimous rejection of Paramount's bid as deficient suggests this is a plausible, and costly, failure mode. For now, the catalyst is the pressure to act by January 21, but the real risk is that the pressure doesn't translate into a board change.