The future of Paramount (PARA) looks as uncertain as the ending of a horror film with blood and guts.
“I will say that Paramount as a company is in quite a bit of trouble right now,” Kevin Mayer, co-founder of Candle Media, told Yahoo Finance at the Cannes Lions Festival this week.
Mayer is credited with leading the launch of Disney+ and serves as a close advisor to Disney (DIS) CEO Bob Iger on succession planning. He was also the CEO of TikTok for a short time after leaving the Mickey Mouse company.
“Maybe it will come back to life, but it has a broken deal process and a business that isn’t doing very well,” Mayer added.
The resurrection looks difficult for Paramount.
Last week, Shari Redstone’s National Amusements, Paramount’s controlling shareholder, closed a deal with David Ellison’s Skydance. The last-minute move surprised those involved in the talks and shareholders.
The reported reasons for the change of heart vary.
They range from Redstone’s inability to sell her father Sumner Redstone’s estate to Ellison’s father, billionaire Oracle (ORCL) founder Larry Ellison, waving his sharp elbows back and forth in the final days of negotiations .
Redstone was also reportedly concerned about the risk of lawsuits resulting from the partnership with Skydance.
“David Ellison and Skydance are great guys, very smart guys. I’m very surprised Shari didn’t ultimately choose that option,” Mayer said. “I think hopefully she’ll figure out what to do here. But right now it’s a big, strange problem.”
This is because Warner Bros. Discovery (WBD) and a joint effort between Apollo Global Management (APO) and Sony (SONY) were also waved away. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
The company now finds itself in tumultuous waters again after former CEO Bob Bakish was ousted in late April. It is currently led by an office of the CEO consisting of Brian Robbins, Chris McCarthy and George Cheeks.
The trio is widely expected to begin a new round of layoffs to shore up Paramount’s finances. At the company’s annual meeting on June 4, Cheeks outlined the potential to save $500 million in costs, on top of extensive cuts made since the completion of the Viacom-CBS merger in 2019.
Paramount could also look at a streaming joint venture with Comcast (CMCSA) to boost profitability and engage in a sales process for the networks BET, MTV and/or VH1, JPMorgan analyst Christian Crosby speculates.
The company posted adjusted operating losses in its direct-to-consumer ($286 million) and film ($3 million) divisions in the first quarter. TV sector profits rose 11% on strong Super Bowl ad spending.
According to data from Yahoo Finance, the stock has lost 80% of its value over the past five years. Its market cap of $6.9 billion is light years away from Netflix’s (NFLX) $292 billion.
“While we continue to believe Paramount retains an attractive asset base, near-term secular and cyclical headwinds will continue to challenge fundamentals,” Bank of America analyst Jessica Reif Ehrlich said in a client note.
Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.
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