When mergers go easily, they’ll signal health and growth in a selected segment of the economy. Unfortunately, Paramount Global’s (NASDAQ:PARA) merger discussions with Skydance Media only appear to be creating consternation recently.
The recent fall-off in PARA stock leaves value seekers with more questions than answers. Then again, stock prices typically don’t drop unless there’s uncertainty. If all the pieces is thought upfront, value opportunities won’t present themselves to investors.
With Paramount Global stock threatening to interrupt below $10 though, there’s a advantageous line separating value from a price trap. If the corporate can’t resolve its issues soon, there could easily be more share-price depreciation in store.
Paramount Global and the “mountain of distrust”
It’s not on daily basis that The Wall Street Journal uses language like this, however it recently declared that Paramount Global faces a “mountain of distrust.” Because the Skydance deal talks drag on, “regular shareholders” evidently have “few options other than voting with their feet.”
Let’s back up for a moment. The general public first learned that Paramount Global was considering a possible merger with Skydance Media, a media-production business led by CEO David Ellison, in December. Fast-forward to early April, when private-equity firm Apollo Global Management (NYSE:APO) offered $26 billion in money to merge with Skydance.
Skydance rejected Apollo’s offer, so Paramount Global’s talks with Apollo continued and are still ongoing, but here’s where it gets much more complicated. Ellison seeks to take control of Paramount Global and has offered to purchase out National Amusements, Paramount’s parent company. Nonetheless, that won’t occur unless Paramount Global merges with Skydance Media.
Thus, Ellison definitely desires to see the Paramount-Skydance merger undergo if he wishes to construct a media empire. If he does find yourself taking control of Paramount Global, it might effectively mark a recent chapter within the long history of an iconic film house with a history that dates all the best way back to 1912.
Even when Ellison really wants the merger to occur, it doesn’t necessarily reflect the desires and intentions of other stakeholders. Paramount Global’s current shareholders might feel that they haven’t any say within the negotiations — or in the long run path of the corporate.
Whether there truly is a “mountain of distrust” facing the corporate is debatable, but there may at the least be a hill of discontent. Based on “people conversant in the situation” and The Wall Street Journal (via Reuters), three Paramount Global board members are expected to depart the corporate “amid merger talks with Skydance Media.”
Again, there are more questions, but definitive answers are few and much between. Are these board members leaving as an act of protest? Is that this an indication of trouble or a breakdown of negotiations between Paramount Global and Skydance Media?
More uncertainty, more worries
Moving past the Paramount-Skydance soap opera for a moment, there’s yet another excuse for Paramount Global’s investors to feel uncertain concerning the near future. Specifically, the corporate’s next earnings report is due for release soon.
Paramount Global will publish its first-quarter financial results after which conduct a conference call on April 29 after the close of the stock market. To be perfectly frank, shareholders might need to exit their positions before the quarterly earnings release.
For what it’s price, Paramount Global did manage to eke out adjusted earnings of 4 cents per share within the fourth quarter. After all, that’s not an enormous profit when the share price is over $10.
For the primary quarter, Wall Street has substantially higher expectations: earnings of 34 cents per share. At the identical time, the entertainment-sector landscape hasn’t gotten any easier for a legacy business like Paramount Global.
TV media is Paramount Global’s largest business segment, and its revenue fell 12% yr over yr within the fourth quarter. Worst yet, Paramount’s movie-segment revenue cratered by 31%.
Thus, it’s a dangerous time for Paramount Global because it is effectively forced to pivot to content streaming and thereby compete with the likes of Netflix (NASDAQ:NFLX). That’s an unenviable task, and the trail forward stays unclear.
Hence, even when it goes below $10, PARA stock doesn’t seem like a compelling bargain. There’s just an excessive amount of that’s up within the air, and current shareholders should thank their lucky stars for any profits they could have — and consider taking them off the table before it’s too late.