Ross Gerber
CEO of Gerber Kawasaki, Portfolio Manager of GK ETF
Paramount Skydance's debt levels are unsustainable in a rapidly changing entertainment industry. Its cost of capital is too high and the numbers it assumes are not attainable, making it the entertainment version of the Titanic. Bloomberg, quoted by @carlquintanilla, reports angry calls from money managers to the banks that underwrote the debt, with paper losses on the investment-grade notes alone topping $100 million. x.comÂ
Paramount Skydance's leverage looks greater than its total enterprise value, leaving the equity impaired. Some assets are great, but the weaker linear ones are melting faster. Cost cuts will save the metrics but kill the future. It is unlikely to dig out; even if it can, it will take years to tell. Its bonds look more interesting than the equity if the optimistic case holds. x.com x.comÂ
Skydance Paramount should probably be a ~$4 stock because, unlike Paramount and Warner Bros. Discovery, it cannot break up or sell; the only way out is through. It starts almost 7x levered, needs mid-single-digit growth and $6B of synergies from two gutted companies, and interest is 150% of FCF as rates rise. Generative content and short-form video are existential threats, and any revenue decline makes sports rights unaffordable. Netflix has ~30% odds of a shot at the WB studio in a bankruptcy. … Show more
Paramount Skydance has 50-100% upside if its Warner Bros. Discovery merger looks likely to go through, odds that are only beginning to be priced in. At a market cap of about $8-9 billion, the stock still sits in bankruptcy territory, because a failed merger would essentially bankrupt Paramount, which cannot survive long on its debt. Big money will be made or lost on it, most likely made. x.comÂ
Paramount Skydance's credit stress adds to its downside risk. Per ZeroHedge, its CDS has surpassed Lehman-era highs; the shares look headed toward their 2009 lows, and a break of those lows would mean bankruptcy. More broadly, stocks are returning toward 2009 lows, not merely below 2020 lows. x.comÂ
Warner Bros. Discovery's merger-arbitrage spread was and remains too tight for the risks. A 9% discount requires Paramount Skydance's equity backstop to be ironclad, credit markets not to break and Oracle to stay solvent. States may also try to block the Paramount Skydance deal, and a "non-MAC MAC" could still threaten it. x.com x.comÂ
Disney is a dog with fleas. Absurdly high theme-park prices face demand elasticity as a weakening consumer in a K-shaped economy pulls back. Its movie lineup is dated, with live-action Moana joining Snow White as box-office bombs; its balance sheet carries heavy debt from poorly conceived acquisitions that could curb park spending; and AI threatens several businesses. There is a price for everything: below $90, reward versus risk turns favorable. x.com x.comÂ
Netflix's recent M&A and content releases have been abysmal, which outweighs its good retention despite price hikes and a tough macro backdrop. Both sides of the argument still need weighing, but the lean is toward exiting. x.comÂ
Rising bond yields could destroy Oracle's business model because its $500 billion in RPO depends on funding the projects with debt and equity; without that money, the RPO does not matter. Its debt yielding close to 8% is a canary, and the model mirrors SunEdison's: it works until it doesn't. A falling stock could make three more years of heavy capex prohibitive, and without AI growth the shares could spiral, possibly forcing Larry Ellison to sell stock to back his Paramount debt guarantee. x.com … Show more
AST SpaceMobile looks set to fall after announcing a $1 billion offering of convertible notes due 2034 while the stock was already struggling. x.comÂ
