It's possible Paramount sale could collapse under pressure from Trump: analysts

Analysts at Lightshed Partners are raising concerns that Paramount's sale to Skydance Media could collapse due to regulatory delays stemming from a $20 billion defamation suit filed by Donald Trump against CBS, alleging deceptive editing by '60 Minutes'; the uncertainty surrounding the lawsuit and FCC approval of broadcast license transfers has stalled the deal, leading to a potential termination date of October 6 if no resolution is reached, and if the deal collapses, Shari Redstone's holding company, National Amusements, which is heavily in debt, could face bankruptcy.

Analysis

The proposed acquisition of Paramount Global by Skydance Media is facing significant headwinds, primarily due to regulatory delays intertwined with a $20 billion defamation lawsuit filed by former President Donald Trump against Paramount's subsidiary, CBS. Analysts, notably Rich Greenfield of Lightshed Partners, express increasing concern that the deal could collapse if these issues are not resolved, projecting a potential termination by October 6, when existing extension provisions for regulatory holdups expire. The Federal Communications Commission (FCC) approval for the transfer of CBS's broadcast licenses is stalled, with the FCC's review timeline now unofficially linked to the resolution of the Trump lawsuit. Paramount's attempt to settle the lawsuit with a reported $15 million offer, similar to a previous settlement by Walt Disney Co.'s ABC News, has been rebuffed by Trump, who is reportedly demanding a larger sum and an apology. This legal entanglement creates a precarious situation for Paramount's largest shareholder, Shari Redstone, whose holding company, National Amusements Inc., is heavily indebted—including a $400 million loan—and could face bankruptcy if the Paramount sale fails. However, if regulatory approval is the explicit reason for the deal's scuttling, National Amusements would avoid a $400 million breakup fee. The situation is further complicated by speculation that Trump may not wish to settle, potentially using the ongoing lawsuit as leverage to exert pressure on media organizations and create Euncertainty for future media combinations involving news assets.

Key Decisions for Investors

• Investors should closely monitor negotiations surrounding the Trump-CBS lawsuit and any FCC pronouncements, as these are pivotal to the Paramount-Skydance deal's viability and timeline.
• The October 6 deadline represents a critical inflection point; failure to secure regulatory approval by this date significantly increases the probability of deal termination, which could severely impact Paramount's (PARA, PARAA) valuation and the financial stability of National Amusements.
• Given the high degree of uncertainty, strongly negative sentiment, and the potential for substantial downside if the deal collapses, investors should reassess their risk exposure to Paramount and consider strategies to mitigate potential losses pending further clarity on the lawsuit and regulatory approvals.