Merger arbitrage · Warner Bros. Discovery
In the second quarter of 2026, several large funds opened positions in a company that had already agreed to be bought for $31.00 a share in cash. They paid $26.66. Three weeks after the quarter ended, twelve state attorneys general sued to stop it.
HolderBook · from Q2 2026 Form 13F filings and the company's own SEC disclosures
Merger arbitrage is among the least romantic trades in finance. A company agrees to be bought at a fixed price. Its shares trade below that price, because the deal might not happen. You buy the shares, you wait, and if the deal closes you collect the difference. The whole business is a judgment about whether something will be allowed to happen, expressed as a number.
By the second quarter of 2026 that judgment looked easy. Warner Bros. Discovery had run a bidding war, chosen Paramount Skydance over Netflix, paid Netflix a $2.8 billion break fee to get out of the earlier agreement, put the deal to its shareholders in April, and received Department of Justice approval in May. The remaining risk looked procedural.
Eleven funds opened positions in the quarter, ranked here by what the position represents inside each manager's own book rather than by dollars. A $500 million position means one thing from a firm running hundreds of billions and something else entirely from a firm running two.
Dan Loeb's fund, and the largest new position of the quarter. Twenty million shares bought at an average of $26.66 against a deal price of $31.00, and more than a ninth of everything Third Point manages committed to a single outcome in a single courtroom.
Almost identical size, almost identical price, and almost nothing as a share of the firm. Sixth Street runs enough capital that half a billion dollars is a rounding error, which is worth knowing before reading it as conviction.
The largest bet on this list by a distance, and it points the other way. Nearly thirty percent of Symmetry's entire reported book arrived in one quarter, and $212.9M of the $436.8M is held in PUT options. A put on a stock trading below an all cash offer is a position that pays if the deal does not happen.
David Einhorn's firm, in at the same price as everyone else buying stock. A modest share of the book, and a straightforward expression of the same trade.
Small in dollars, meaningful in proportion. More than a twenty-fifth of the fund in a merger that had already cleared its shareholder vote and its antitrust review.
A quantitative shop with thousands of positions. This one is two hundredths of one percent of the book, which is to say it is a model output rather than a view.
A round 930,000 shares at the prevailing arbitrage price.
An event driven manager of long standing, taking a position sized to matter without dominating.
Primarily a credit manager. Its presence on an equity register in the middle of a contested merger is itself the interesting part.
No shares at all. The entire position is put options, which makes Decagon the second fund on this list to arrive in the quarter and bet against the closing rather than for it.
The highest concentration on the list after Symmetry. Better than a sixteenth of the book in a position that depends on a judge in Oakland.
Look again at the third entry. Symmetry Investments put more of its book into this than any other manager on the list, and $212.9 million of the $436.8 million sits in put options. Decagon's position is put options and nothing else.
A put on a stock trading at a discount to an agreed cash price is not a hedge on a long position, because these funds had no long position to hedge. It is a bet that the deal fails and the shares fall back to what the company is worth on its own. Two of the eleven arrivals were positioned against the outcome the other nine were paying for.
That distinction is invisible on any site that reports a single figure for derivative holdings. A 13F names the security and marks the line as a put or a call, and reading it either way produces the opposite conclusion about what a manager thinks.
A trade the buyers could reasonably have expected to settle inside a quarter now has a trial date more than eight months after they opened it. The 16.3% is unchanged in size and completely changed in character: the same money for a much longer wait, and a materially larger chance of no payment at all.
The merger agreement carries a ticking fee. For every quarter the deal remains unclosed after 30 September 2026, Warner shareholders receive an additional 25 cents a share. Across roughly 2.5 billion shares that is about $7 million for each day of delay, paid by the buyer.
It is a real feature of the trade rather than a footnote. It does not make the arbitrage safe, because a blocked deal pays nothing at all. But it means the funds who bought at $26.66 are not simply waiting: the price they eventually receive rises the longer the courts take, which is an unusual thing for a delay to do.
A 13F is a photograph taken on 30 June and published up to forty five days later. Every position here could have been closed in July, before the lawsuit or after it, and nothing in the data would show it. The buying is a fact about what these funds held on one day in June, not a statement about what they believe today.
It is also worth being plain about what the money says. Between the first and second quarters, the total institutional position in Warner Bros. Discovery went from $53.4 billion to $57.9 billion, while the number of institutions holding it rose from 1,312 to 1,319. Almost all of that increase is the share price, not new buyers. The story is not that a crowd arrived. It is that a small number of specialists took a large and identifiable position on a specific legal outcome, and that two of them took the other side.
Positions are as reported to the SEC for the quarter ended 30 June 2026, corrected for amendments. Average prices are the reported value of each position divided by its reported share count, which is the price implied by the filing itself rather than a market quote. Share of book is the position's value against the total that manager reported on the same form, so it covers disclosed US equity positions only and not shorts, bonds, foreign listings or cash. Deal terms, the litigation timeline and the ticking fee are taken from Warner Bros. Discovery's Form 10-Q for the same quarter and from the merger agreement. Nothing here is investment advice, and nothing here predicts how a court will rule.