‘The most unfavorable time in the world to sell’

Paramount’s stock took a hit on Thursday, dropping more than 8% after a significant surge the day before. The reason behind this rollercoaster ride? Reports of exclusive merger talks with David Ellison’s Skydance Media.

The timing of these discussions has raised eyebrows, with media mogul Barry Diller expressing skepticism about the potential sale. Diller believes that Paramount is actually in a position to turn itself around, making it a less than ideal time to sell. Despite declining a $26 billion all-cash offer from private equity firm Apollo, Paramount seems to be exploring its options.

The company has been struggling in its streaming business, reporting a direct-to-consumer loss of $490 million in the fourth quarter. To combat these losses, Paramount has implemented various cost-efficiency plans, including layoffs and price hikes. However, a potential sale has been looming for months.

Skydance’s proposed two-step deal targeting Paramount’s holding company, National Amusements, could potentially shake up the industry. Shari Redstone, president of NAI and controlling shareholder of Paramount Global, is at the center of these negotiations.

Despite the buzz surrounding the potential merger, Wall Street analysts remain cautious. Laura Martin of Needham and Doug Creutz of TD Cowen both express doubts about the deal’s complexity and potential impact on current Paramount shareholders.

As the industry waits to see how this story unfolds, Paramount’s status as a potential acquisition target remains unchanged. With a market cap significantly smaller than its competitors, the company’s future hangs in the balance as these merger talks progress.