Paramount Will Keep Its Family Discount
Implosion of Skydance deal leaves media giant alone in a turbulent landscape with an unpredictable controlling shareholder
It has been some time since Paramount Global PARA -6.92%decrease; red down pointing triangle was valued strictly on its own merits. The results aren’t pretty.
Much has happened to the company and the overall media landscape since the merger of CBS and Viacom completed in December of 2019, which created Paramount in its current form. The rise in streaming that has decimated the cable-TV and movie theater businesses has also wreaked havoc on the market values of traditional media companies. Shares of Disney DIS -0.70%decrease; red down pointing triangle, Comcast CMCSA -0.66%decrease; red down pointing triangle, Fox and Lions Gate LGF.B 1.23%increase; green up pointing triangle have all posted negative returns over the past five years, badly lagging behind the S&P 500’s 88% gain in that time, according to FactSet data.
Even in that crowd, though, Paramount stands out. By the start of this week, the stock was down 71% from when the Viacom-CBS deal was completed. Then it lost even more ground following a last-minute decision by controlling shareholder Shari Redstone to pull the plug on negotiations with Skydance Media, which had planned to merge with Paramount in a complex transaction.
That decision has effectively killed hopes for a deal that would provide some payoff for Paramount’s wider base of shareholders, though some suitors reportedly are still interested in making a play for Redstone’s National Amusements entity that owns the controlling stake in Paramount. In a note to clients this week, analyst Ric Prentiss of Raymond James wrote “we do not believe there is another bidder who could actually acquire or merge with Paramount itself.” In his own report, Robert Fishman of MoffettNathanson wrote that Redstone “now seems set on either continuing the status quo or divesting herself of just her NAI stake”—options he described in a previous note as “the worst outcome for shareholders.”
They have already paid dearly. The shares have now lost three-quarters of their value since the day the Viacom-CBS deal closed in 2019, equating to about $17.7 billion in lost market value, according to data from S&P Global Market Intelligence. Paramount now carries a market capitalization of a little over $7 billion—the sixth smallest in the S&P 500 index and just above that of Etsy, an online seller of handmade goods that generates less than a 10th Paramount’s annual revenue.
One might be tempted to think there is nowhere to go but up. But losing the Skydance deal leaves Paramount’s shareholders with a company run by a triumvirate of CEOs hastily appointed to the position in April after the departure of longtime chief Bob Bakish. The trio plans to cut $500 million in annual costs and explore partnerships or joint ventures with other companies, according to a plan outlined at Paramount’s annual meeting last week.
Few expect the arrangement to last; even dual-CEO models have largely failed at other companies. Media analyst Rich Greenfield of LightShed Partners speculated in a report Wednesday that Paramount director Charles Phillips could end up with the CEO job. It would be an interesting pick. Phillips is a longtime tech executive who was once a close lieutenant of Oracle founder Larry Ellison, the father of Skydance CEO David Ellison. But he also had previously voiced some concerns about the Skydance deal to Redstone, according to reporting by The Wall Street Journal.
Regardless of who ends up in the corner office, the past week has made especially clear that Paramount’s fate is only in the hands of its controlling shareholder. That will be seen as an even bigger liability now, given Redstone’s track record.
“Since taking effective control of Paramount (and Viacom prior), we think Ms. Redstone has created a legacy of equity value destruction,” wrote Steven Cahall of Wells Fargo, who downgraded the stock to an underweight rating this week. He has plenty of company; 38% of analysts rate Paramount’s shares as a sell compared with only 6% having the same opinion of Warner Bros. Discovery WBD -6.66%decrease; red down pointing triangle, another struggling media giant.