‘Mispriced’ Warner Bros. Deal Spread Creates Windfall Potential

Paramount Skydance Corp. may have won out against Netflix Inc. in the fight to buy Warner Bros. Discovery Inc., but there are enough market cross-currents and doubts around the pending $111 billion deal to make buying shares of the target an enticing wager.

Shares of Warner Bros. have fallen more than 7% from their peak in February to around $27, some $4 less than the price Paramount agreed to pay, a classic signal of diminishing probability of the deal getting done.

While it’s not unusual for a target’s stock to trade below the price of a deal — there’s ...