In the fourth quarter of 2025, LVS Advisory, a prominent New York City-based investment firm, observed a notable decline in Netflix (NFLX) stock. This downturn was primarily attributed to investor anxieties regarding the substantial $83 billion acquisition of Warner Brother Discovery. Despite Netflix holding the position of LVS Advisory's largest investment, accounting for an 18% portfolio weight at the quarter's outset, the news of the acquisition triggered a significant 21.8% drop in its stock value. The firm’s Q4 2025 investor letter detailed these market movements, also noting that while their Event-Driven Portfolio achieved a 9.1% net appreciation in 2025, and the Growth Portfolio gained 6.2% net, the latter experienced an 8.2% loss in Q4. This performance contrasts with the High-Yield Bond Index's 8.8% and the S&P 500 Index's 17.9% for the year, underscoring the market's reaction to major corporate actions.
Netflix Experiences Significant Stock Drop Amidst Acquisition Concerns
On February 10, 2026, Netflix, Inc. (NASDAQ:NFLX), the global streaming entertainment giant, saw its stock close at $82.21 per share. This figure reflected a one-month return of -7.16% and a stark 19.98% decline over the preceding twelve months. The company's market capitalization stood at $348.726 billion. The primary catalyst for this recent plunge, as identified by LVS Advisory in its fourth-quarter 2025 investor letter, was the substantial $83 billion acquisition of Warner Brother Discovery. This acquisition, announced on a specific date not explicitly stated but implied within the fourth quarter of 2025, sparked considerable concern among investors, leading to a 21.8% drop in Netflix's stock during that quarter alone. LVS Advisory, which held Netflix as its largest portfolio investment with an 18% weight at the start of Q4, highlighted these developments. Furthermore, at the end of the third quarter of 2025, 154 hedge fund portfolios held Netflix, Inc. (NASDAQ:NFLX) shares, an increase from 133 in the previous quarter, indicating a continued, albeit now more cautious, interest from institutional investors. Despite this, some firms, like Polen Capital Management, divested their Netflix holdings in Q4 2025 due to concerns over regulatory issues and increased leverage resulting from the acquisition, signaling a mixed sentiment within the investment community regarding the long-term implications of this strategic move.
This situation highlights the delicate balance between strategic corporate growth and investor perception. While large-scale acquisitions can offer significant long-term benefits, the immediate market reaction often reflects concerns over debt, integration challenges, and potential shifts in business focus. For investors, it underscores the importance of scrutinizing the details of such deals and their potential impact on a company's financial health and market position. The divergence in hedge fund strategies—some increasing holdings while others divest—suggests varying interpretations of Netflix's future trajectory post-acquisition. This event serves as a crucial reminder that even established market leaders are not immune to significant volatility when undertaking transformative business decisions.