Netflix Opts For Another Stock Split — And Is Reportedly Interested In Some Warner Bros. Assets
The streaming giant said the purpose of the split is to reset the price to a range more accessible to employees participating in the stock option program.
- Netflix shareholders will receive nine additional shares for every Netflix stock they hold on the record date of Nov. 10.
- The stock will begin trading on a split-adjusted basis on Nov. 17.
- Stock splits typically generate a positive reaction following the announcement and in the period leading up to the effective date.
Netflix, Inc. (NFLX) stock climbed in Thursday’s extended session after the streaming giant announced its third stock split, making shares more accessible to retail investors. Separately, fresh rumors of Netflix’s interest in traditional media company Warner Bros. Discovery, Inc. (WBD) sent the latter’s stock higher by nearly a similar magnitude in the after-hours.
After slipping 1.04% in Thursday’s regular session, Netflix stock rallied 3.19% in extended trading. The stock has gained over 22% year-to-date (YTD), while WBD’s stock has jumped nearly 105%, benefiting primarily from rumors of a potential buyout that have been swirling since September.
Netflix Makes Stock Affordable
Los Gatos, California-based Netflix announced that its board has approved a 10-for-1 stock split, which will be effected through an amendment to and restatement of its certificate of incorporation. “The purpose of the stock split is to reset the market price of the Company’s common stock to a range that will be more accessible to employees who participate in the Company’s stock option program,” the company said.
Netflix shareholders will receive nine additional shares for every Netflix stock they hold on the record date of Nov. 10. The split will take effect on Nov. 14, and the stock will begin trading on a split-adjusted basis on Nov. 17. Previously, Netflix had split its stock twice: on Feb. 12, 2004 (2:1), and on July 15, 2015 (7:1).
Stock splits typically generate a positive reaction following the announcement and in the period leading up to the effective date. But the price immediately adjusts down after the effective date. Technically, this corporate action does not alter a company’s market capitalization, as the number of outstanding shares increases while the per-share price decreases.
When Netflix announced its first split on Jan. 21, 2004, the stock gapped 18% higher in the very next session, then moved roughly sideways before giving back all its pre-split announcement gains. The stock ended the year down about 54%.
Chart Courtesy of Koyfin
The company’s stock split announcement on June 23, 2015, produced only a muted reaction in the session that followed, and it gained momentum only in the week preceding the split’s effective date. It promptly gave back the gains after the split took effect. Netflix stock gained momentum only after the company released its June quarter results on July 15, 2015.
Chart Courtesy of Koyfin
Commenting on the split announced on Thursday in an X post, an options trader said, “$NFLX doing a 10-1 stock split is excellent for traders and investors. A win-win if you know how to capitalize on it. Cheaper shares and cheaper contracts on options.”
What Retail Feels About NFLX Stock
On Stocktwits, retail sentiment toward Netflix stock remained ‘bullish’ as of early Friday, although it had risen a few notches within the bullish territory. The message volume on the stream remained ‘normal.’
Retail broadly welcomed the stock split. “Split could be great. Or [it]ould be a real Chipotle. Value is on Netflix side. Would like to see it test 1000 or lower for a second,” they said. The stock ended Thursday’s session at $1,089.
Another user wondered whether the stock would reach $1,400 by the split date.
WBD Buyout Speculation
A Reuters report, citing three sources familiar with the matter, stated on Thursday that Netflix is actively looking to buy WBD’s studio and streaming business. While announcing the initiation of a strategic review in light of interest from multiple parties, WBD said in late October that it continues to advance its previously announced separation of Warner Bros. Discovery.
The Reuters report also said the streaming giant has retained Moelis & Co. as its financial advisor and has gained access to financial information as part of the due diligence process. Incidentally, Moelis had advised Skydance in its successful takeover of Paramount, and the combined company, now called Paramount Skydance (PSKY), is also courting WBD.
The rumor follows WBD’s board reportedly rejecting a nearly $60 billion offer from Paramount Skydance last week.
Benchmark analysts recently named Netflix, Apple, Amazon, and Comcast as potential suitors for WBD. However, they stated that the latter three might face transactional friction from the Trump administration in the event of a deal. On the earnings call held last week, however, Netflix’s management ruled out a merger with a traditional media company.
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