Paramount said on Feb. 27 it clinched the WBD deal; the stock has fallen by over 28% since then.
- Paramount shares are under pressure as investors question whether its hefty, debt-fueled WBD acquisition would work out.
- Fitch Ratings has downgraded Paramount Skydance and Paramount Global's ratings to junk status.
- Stocktwits sentiment for PSKY shifted to ‘bullish’ from ‘neutral.’
Paramount Skydance shares rose 1.7% in early premarket trading on Monday, offering investors some respite after the stock’s sharp slide in recent weeks.
Shares of Paramount Global have fallen in nine of the past 10 trading sessions amid a broader market decline linked to the U.S.-Iran war and investor concerns over the heavy debt tied to its deal for Warner Bros. Discovery, effectively erasing the 32% surge the stock logged late last month after the company secured the deal over Netflix.
Even before that, the stock had been on a downward trend for months. At the moment, PSKY is down 51% from its Sept. 23 peak.
On Feb. 27, Paramount said the Warner Bros. board accepted its sweetened $31-per-share offer to acquire the entire company, with the deal expected to close in the third quarter. Netflix, with whom Warner Bros. had previously signed the deal, refused to match Paramount's raised offer.
Warner Bros. is now set to hold a special shareholder meeting on Friday, where shareholders will vote on whether to accept Paramount's offer or side with Netflix.
Investors Question WBD Deal
Although Paramount has won its hot pursuit, investors now question whether the deal is even worth it. Paramount will pay an eye-popping $111 billion, largely funded by debt, along with a $2.8 billion breakup fee to Netflix on WBD’s behalf.
Earlier this month, credit rating agency Fitch Ratings downgraded Paramount Skydance and Paramount Global's ratings to junk status. It placed the company on watch for a potential further downgrade once the acquisition's final terms and financing structure, and its plans to address that debt, become clearer.
On Stocktwits, retail sentiment for PSKY shifted to ‘bullish’ early Monday, from ‘neutral’ the previous day.
A user shared a contrarian view: “New wave of inflation due to global instability will diminish more of the debt and companies with good cashflow like PSKY and WBD will emerge as the winners in 1-2 years.” On the other hand, a user advised selling Paramount shares and buying Netflix stock.
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