A pricey acquisition agreed to by two peers in the entertainment industry has left Netflix (NFLX 0.39%) in the cold, and Mr. Market punished the company for it on Tuesday. That, plus a media report stating that the video streaming giant tried but failed to buy the target company in that deal, pushed its stock down by nearly 4%.
Outfoxed?
That acquisition was announced before market open Monday. Legacy media and entertainment company Fox Corporation is buying video streaming company Roku in a cash-and-stock deal valued at $22 billion.
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The deal has been approved by the boards of directors of both businesses and is anticipated to close in the first half of next year.
Compounding that, news site Semafor reported on Tuesday that Netflix also pursued Roku, but its advances were rebuffed. Quoting unidentified "people involved in the sale process," Semafor wrote that it was unclear how much Netflix had bid for the company, though one of its sources said its bid was below the $160-per-share price Fox offered.
Netflix has not yet made any official comment about the report.
NASDAQ: NFLX
Key Data Points
Opportunity cost
If I were a Netflix shareholder, though, I'd be at least somewhat relieved that the company didn't spend a mountain of capital on a Roku deal.
Despite the obvious advantages of owning such a complementary asset, the regulatory path to approval would have been more challenging than that for Fox, even in the current climate that seems favorable for big media mergers. After all, Netflix is already a powerful presence in video streaming, and there would have been concerns about market dominance.
Meanwhile, Netflix might still be actively looking to expand. In the Semafor article, the news site said that the company is mulling a possible play for TV and film studio Lionsgate. Later in the day, however, Netflix denied this.
