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Why is Paramount Global (PARA) Stock down?
Paramount Global (PARA) stock fell by 7.52% due to Paramount's unique ownership structure, where National Amusements Inc. (NAI) controls over three-quarters of the voting shares but only holds about 10% of the equity. This imbalance poses a risk of dilution for other shareholders.
- Negotiations and Potential Acquisition: During an exclusive 30-day negotiating window, Skydance and NAI discussed an all-stock transaction valued around $5 billion. This deal would involve a $2 billion cash infusion from Skydance, along with investments from Redbird Capital and KKR. Former NBCUniversal CEO Jeff Shell, affiliated with RedBird, is expected to take on a senior role in the new entity, with Ellison as CEO.
- Paramount's Strategic Assets and Suitor Interest: Paramount's extensive linear TV holdings, including CBS and cable networks like Comedy Central and Nickelodeon, add complexity to the acquisition. Despite this, Ellison emerged as a leading candidate due to his interest in Paramount Pictures. However, his focus may not extend to Paramount's TV assets and streaming services, which could impact the negotiation process.
- Shareholder Concerns and Legal Action: Several shareholders, including Matrix Asset Advisors, expressed concerns about the potential acquisition, describing the Skydance scenario as "sub-optimal" and "significantly dilutive." Analysts have highlighted the potential for legal action from shareholders who feel that the board has a fiduciary duty to consider all shareholder interests, not just those with voting power.
- Redstone's Decision and Market Value: Redstone reportedly turned down a $26 billion offer from Apollo Global Management, opting not to pursue a sale of the entire company. Paramount's market value has dipped below $8 billion, significantly lower than the offer. The company was formed in 2019 following the merger of CBS and Viacom.
- Future Outlook: Analysts expect continued volatility in Paramount's stock price as the negotiation process unfolds. Redstone's reluctance to accept Apollo's offer, which included assuming Paramount's significant debt, suggests a desire to maintain the company's integrity rather than breaking it apart for short-term gains. Regardless, Paramount has real offers on the table, and its future will be determined in the coming weeks.
Paramount Global (PARA) stock fell by 8.51% following reports that the company has entered into exclusive merger talks with David Ellison's Skydance Media. This drop came after a 16% surge the day prior, driven by the news of the potential merger.
- Paramount's Financial Challenges: Paramount has been experiencing financial difficulties, particularly in its streaming business, where it reported a direct-to-consumer loss of $490 million in the fourth quarter. The company has also seen declines in linear TV revenue as more consumers cut the cord.
- Skydance Merger Talks: Paramount entered into exclusive talks with Skydance after declining a $26 billion all-cash offer, including $14 billion of debt, from private equity firm Apollo. Skydance aims for a two-step deal targeting Paramount's holding company, National Amusements, which owns approximately 10% of Paramount's equity capital value and maintains 77% of voting shares.
- Analyst Skepticism: Wall Street analysts are skeptical about the Skydance deal's likelihood of success, citing its complexity and the potential challenges for current Paramount shareholders. Paramount's small size relative to competitors, with a market cap of just around $8 billion, has long made it a potential acquisition target.
Paramount Global Stock (PARA) declined by 5.52% due to a report by the Financial Times indicating that controlling shareholder Shari Redstone is "unconvinced" by a private equity offer.
- Offer Details: Apollo's offer valued just the studio at more than the entirety of Paramount Global, which caused the stock to rise by 12% on Wednesday.
- Redstone's Concerns: Shari Redstone, who has long regarded the studio as the centerpiece for Paramount, is reportedly hesitant about a deal without the studio, which was a cherished asset of her father, Sumner Redstone.
- Potential Impact: This led to a deal complexity. A deal without the studio could be far trickier to engineer, given its historical significance to the Redstone family and its strategic importance to Paramount.
Paramount Global (PARA) stock dropped by 5.45% due to actions taken by investment firm Redburn Atlantic. Redburn Atlantic downgraded Paramount for ongoing concerns related to linear advertising.
- Analyst's Perspective: In a note to investors, analyst Hamilton Faber of Redburn Atlantic expressed his apprehensions about the state of linear advertising and its potential impact on these media companies. Faber pointed out that linear advertising is currently at a negative tipping point, and he believed that consensus forecasts do not adequately account for the declines anticipated within the industry.
- Impact on Paramount: Of the two companies, Paramount appears to be more severely affected. This is because of its low profit margins, which make it particularly sensitive to any fluctuations in advertising revenue. Faber emphasized that changes in advertising have a "very meaningful impact on total company EBITDA" (Earnings Before Interest, Taxes, Depreciation, and Amortization) for Paramount.
- Forecasts: As a result of the downgrade, Faber provided his forecasts for the companies. He expects a 10% downside to EBITDA estimates for Paramount over the next three years. Additionally, he anticipates a substantial 21% downside to earnings per share estimates for the company.
Paramount Global Stock (PARA) dropped by 7.78% from $13.76 to $12.69 in the trading on Monday November 6, 2023. The reason why PARA stock down today is due to the double downgrade from analysts. Bank of America analyst Jessica Reif Ehrlich lowered her rating on the stock from buy to underperform with a price target of $9, down from $32. BofA sees a challenging macro environment and secular headwinds weighing on the business into 2024.
Paramount Global (PARA) stocks fell 9.54% Friday after Walt Disney blocked TV channels like ESPN and ABC from Charter's cable system, Spectrum. The dispute spilled over into the performance of other media companies.
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