Bob Olstein: Disney Shouldn't Buy Netflix

While Wall Street speculates about whether Disney will buy Netflix, one Disney shareholder says the possible tie up is a bad idea.

Bob Olstein, chief investment officer at The Olstein Funds which owns shares of Disney, worries about Netflix’s free cash flow situation compared to Disney’s.

“Disney is going to earn somewhere around $8 billion of free cash flow… Netflix [is] losing in free cash flow every year $1.5 billion. They both have the same amount of capitalized expenses on the balance sheet,” he explained.

While Netflix has a portfolio of popular shows including “Orange Is the New Black,” “House of Cards” and “Fuller House,” Olstein said he’s worried about how the burden of more investment by Netflix would impact Disney and its shareholders after an acquisition.

Olstein even said as much in a letter to Disney CEO Bob Iger.

“If he buys Netflix, my prediction is the stock’s heading down 30% the next day,” he said. “Product is king going forward. Don’t go out and buy distribution. Distribution is too competitive.”

Disney is no stranger to acquisition speculation. Earlier this year the company was rumored to be interested in acquiring Twitter, though a deal never came to fruition.