Shari Redstone in ‘tough spot' as Paramount board fears settling with Trump will open Pandora's box on bribery lawsuits: sources

Paramount's board and Shari Redstone are reportedly hesitant to settle a $20 billion lawsuit with Donald Trump over a '60 Minutes' interview due to concerns that a settlement could be construed as bribery to influence FCC approval of the $8 billion Paramount-Skydance deal. The board fears that Directors and Officers liability insurance would not cover potential bribery charges, exposing them to shareholder lawsuits, criminal investigations, and congressional hearings, particularly if Democrats gain power. Redstone is said to be willing to pay Trump up to $50 million to settle the case, but the optics of settling with Trump while the FCC reviews the Skydance deal are raising concerns about potential legal and financial repercussions.

Analysis

Paramount Global (PARA, PARAA) and its controlling shareholder Shari Redstone are navigating a precarious situation involving a potential $50 million settlement of a $20 billion lawsuit from Donald Trump, coinciding with the critical FCC review of the $8 billion Skydance merger. The board's primary concern, as indicated by sources, is that such a payment could be construed as bribery to favorably influence the FCC's decision on the Skydance deal, an act typically excluded from Directors and Officers (D&O) liability insurance coverage. This exposes directors to significant personal risk, including potential shareholder lawsuits, criminal investigations, and protracted congressional hearings, especially with vocal opposition from some lawmakers. The urgency for Redstone is underscored by her diminished personal wealth due to Paramount's stock decline, her potential $2 billion proceeds from the Skydance sale, and a looming $200 million tax liability. The lawsuit itself, alleging deceptive editing by '60 Minutes' in an interview with Kamala Harris, is also under FCC scrutiny, further complicating the Skydance approval process. Despite Paramount's official stance that the lawsuit is unrelated to the merger, the strongly negative sentiment (-0.8 for PARA/PARAA) and pessimistic tone surrounding these events highlight the substantial uncertainty and potential for adverse outcomes impacting the company's future and the completion of the Skydance transaction.

Key Decisions for Investors

• Investors should closely monitor announcements regarding the Trump lawsuit settlement and the FCC's decision on the Skydance merger, as these are critical inflection points for Paramount's valuation.
• A cautious stance on Paramount (PARA, PARAA) is warranted given the significant legal and governance risks, particularly potential bribery allegations not covered by D&O insurance, which could derail the Skydance deal.
• Consider the heightened risk profile for Paramount shares stemming from the lawsuit's entanglement with the merger approval, potential personal liabilities for the board, and the pervasive negative sentiment.