A California judge issued a temporary restraining order blocking the Paramount and Warner Bros. merger. State attorneys general filed the lawsuit. They cited antitrust concerns. The companies wanted to combine their streaming services that lose money separately into one streaming service that loses money together.
Retail traders heard the news and immediately checked which stock to buy. They found two stocks. Both were down. They bought both anyway. This is called diversification.
The antitrust argument rests on the idea that consumers benefit from competition between platforms that all charge $15 a month for content nobody watches. Without competition, they might charge $15 a month for content nobody watches. The difference is meaningful to economists who get paid to find differences.
Warner Bros. Discovery already owns HBO Max or Max or whatever they're calling it this week. Paramount owns Paramount Plus, which your aunt subscribed to by accident. Together they would control nearly 8% of the streaming market. Netflix and Disney would tremble at this figure if 8% were somehow larger than 92%.
The judge granted the restraining order after reviewing evidence that merging two companies might result in one company. Legal scholars call this a precedent. The rest of us call it counting.
Day traders saw the headline and started scanning for options plays on media conglomerates. They found expensive calls. They bought them. The calls expired worthless on Friday. The traders will spend Monday explaining how the restraining order was actually bullish.
The merger would have created a powerhouse with the combined assets of SpongeBob SquarePants and Batman. Investigators determined that giving one company both SpongeBob and Batman violates the Sherman Antitrust Act and basic human decency.
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