David Ellison’s freshly formed Skydance Corp. is off to a rocky start on Wall Street.
He won Warner Bros. Discovery after a yearlong battle. But investors, at this point, appear to believe he wildly overpaid for the deal — that the newly merged company, dubbed Skydance Corp., is worth nowhere near the $78 billion in cash Paramount shelled out for WBD.
On Wednesday, Skydance’s stock plunged 22%. That came after the company distributed about 471 million warrants giving holders of Paramount Skydance’s PSKY Class B shares the option to purchase stock in the new company for $12/share.
With the merger’s closing, Paramount paid WBD shareholders an amount in cash equal to $31.01666668 per share for a total of about $78 billion. Under the terms of the deal, Paramount also is assuming WBD’s debt ($33.1 billion as of the end of June), leaving the merged company’s net debt at nearly $80 billion.
Meanwhile, Skydance’s Class B investors don’t have a say in corporate governance issues. The Ellison family and RedBird Capital Partners are the sole holders of Skydance’s Class A stock, giving them 100% control the voting shares. (Those Class A shares do not have intrinsic value but have the option to for each share to be converted into 1.5 Class B shares, according to a Skydance SEC filing.)
Some market watchers see a Skydance as an attractive investment opportunity after Wednesday’s stock drop.
