Paramount Skydance (PSKY) dropped in early trading today after it hit a legal roadblock in its campaign to derail the pending merger between Warner Bros. Discovery (WBD) and Netflix (NFLX). A Delaware judge rejected Paramount’s request to expedite a lawsuit that seeks to force more transparency from the Warner Bros. board. The decision comes at a critical moment in the bidding war, as Paramount continues to pitch its $108 billion all-cash takeover as a better alternative to the streaming giant’s offer.
Claim 70% Off TipRanks Premium
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
Paramount Believes Warner Bros. Is Hiding the Math Behind the Netflix Deal
The core of Paramount’s legal argument is that Warner Bros. is hiding the real math behind the Netflix deal. Paramount’s hostile bid is worth $30 per share in cash, while the Netflix deal sits at roughly $27.75 per share in a mix of cash and stock. Warner Bros. has defended the Netflix deal as superior, partly due to the complexities of a planned spin-off of its cable networks into a new company called Discovery Global.
Paramount Chairman David Ellison has been vocal about wanting the board to reveal how they valued those assets. In a public letter to shareholders earlier this week, Ellison stated his intention to challenge the deal, noting he would contest it at the “regular Warner Bros. annual meeting or at a special meeting convened to approve the deal if one is set.”
Why the Judge Rejected the Fast-Track
In Delaware corporate law, getting a case fast-tracked (or expedited) is a high bar to clear. To win, a plaintiff usually has to show that if the court doesn’t act right now, a permanent mistake will be made.
Judge Zurn pointed out that since Paramount is currently running its own tender offer, which expires January 21, it doesn’t actually need the disclosures to make its own decisions; rather, it wants them to convince other investors.
The Ruling’s Impact on the Bidding War
This ruling is a tactical victory for Warner Bros. Discovery and CEO David Zaslav. By slowing down the lawsuit, the board can move closer to finalizing the Netflix merger without being forced into an immediate tell-all discovery process. However, the fight is far from over. Paramount is already preparing for a proxy battle to replace three board members at the next annual meeting, hoping to install directors who will favor the $30 all-cash offer.
For investors of Paramount Skydance stock, the focus is now on the January 21 deadline. If enough Warner Bros. shareholders tender their shares to Paramount despite the board’s opposition, the pressure could force a renegotiation, even without the help of a fast-tracked lawsuit.
Is Paramount Skydance Stock a Good Buy?
Turning to Wall Street, PSKY stock has a Moderate Sell consensus rating based on one Buy, seven Holds, and seven Sells assigned in the last three months. At $14.08, the average PSKY price target implies 17% upside potential.
