Skydance Corp has started trading poorly, with its market value falling below the combined worth of Warner Bros. Discovery and Paramount before the deal. Investors are questioning whether David Ellison paid too much and whether the company can meet its savings and debt targets.
01Summary
- 01On 5 October, Warner Bros. Discovery was valued at $77.7 billion and Paramount at about $11 billion, while Skydance later fell to under $40 billion.
- 02Skydance shares dropped 22% on Wednesday after the company distributed about 471 million warrants to holders of Paramount Skydance Class B shares.
- 03The New York Stock Exchange made a technical adjustment to Skydance’s share price on Tuesday to account for the warrants, which Skydance said were worth about 9% of its Class B common stock.
- 04Skydance says the warrant distribution implied a market cap of $45.6 billion at $9.07 a share, while the warrants were worth about $1 billion in total.
- 05Analysts and credit-rating agencies are sceptical that Skydance can deliver $6 billion in annualised cost savings while servicing more than $6 billion a year in interest payments.
02Why it matters
The stock slump shows how quickly Wall Street can turn on a major media deal if investors doubt the price or the financial plan. It also matters because the merged company is carrying heavy debt and will need to prove it can cut costs without hurting content output.
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