When reports emerge talking about a “nightmare scenario” for any company, even entertainment giant Paramount (PARA), it is something to take seriously. And new reports suggest that Paramount is already considering that nightmare scenario, one far worse than any Jason Voorhees outing: a future where the Skydance merger fails to materialize. Investors are taking it in stride, however, as shares notched up fractionally in the closing minutes of Monday’s trading.
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Puck recently took a look at the nightmare in question, and if this does go wrong, it will mean disaster for Paramount and for Shari Redstone in particular. We know that the deal between Paramount and Skydance has multiple “walk away” deadlines built in, and one of these kicked in back in April, pushing back the deadline to July 7. There will be one more pushback allowed on July 7, that shoves the date to October 7, though some have suggested that if the deal does not go through in July, the chances of it going through at all dwindle.
But if the deal does break up, that means a $400 million breakup fee for somebody, and no $2.4 billion in cash for the Redstones. With the Puck report noting that National Amusements—the Redstone-owned company that owned the bulk of Paramount—is facing financial troubles to the point of potential bankruptcy, a loss of a huge slug of cash and a surprise bill on top of it is not what they needed to see. National Amusements already owes Larry Ellison $300 million, which Redstone used to pay off various creditors. But there is also a $250 million bill to BDT & MSD Partners, the merger and acquisition (M&A) advisory firm. Worse, National Amusements seems to have little to pay off those bills but their stake in Paramount, the report noted. A potential credit downgrade also lurks in the background that would hit Paramount’s $11 billion in debt, forcing a repurchase of said debt at “101 cents on the dollar,” the report noted.
Amanda Seyfried on Line Two
And as if all that were not bad enough, Amanda Seyfried, star of Mean Girls, is also waiting in the Paramount creditor line, reports note. Reports noted that Seyfried’s likeness appears on several T-shirts connected to the film, and Paramount has not actually paid her for the use of said likeness.
Just how much cash is involved in that particular debt is unclear, and some wonder if Seyfried’s contract may have already covered the use of likeness in merch. But either way, that is the kind of thing that seems to be adding to Paramount’s troubles these days. A merger that is stalled, a massive potential bill to pay if it fails, and now, a former star come to collect.
Is Paramount Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on PARA stock based on two Buys, eight Holds and five Sells assigned in the past three months, as indicated by the graphic below. After a 0.5% loss in its share price over the past year, the average PARA price target of $12.08 per share implies 1.38% upside potential.
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