GregTheAnalyst
Independent Investor, Macro/Micro & Technical Analysis
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
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
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
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
Netflix's six straight botched earnings reports undermine its stock. Its co-CEOs should go; shares are at a two-year low and down 60% since its involvement in the Paramount deal and acquisition. x.com x.com x.comÂ
CoreWeave's high bond yield and CDS suggest its heavy debt could make future funding costlier and leave equity exposed after creditors. The 15%+ bond yield appears to be a market yield, not the cost of existing debt; debt exceeds roughly $35B. Long hyperscaler contracts help, but do not erase the leverage and credit-stress gap versus Nebius, which also has a large backlog. ASML says chip scarcity could last to 2028, so providers with live capacity could benefit. x.com x.comÂ
High debt and rate hikes make a big US equity correction likely. Warsh said nothing useful despite hot CPI and PPI after two weeks of hawkish rhetoric, while the rest of the Fed fence-sits. A debt crisis is incoming, and some funds will blow up soon. Big caps are the last leg; the bigger correction could be something like 20%. It is not a good time to buy dips. x.com x.com x.com x.com x.com x.com 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
US tech stocks are at serious risk of a hedge-fund deleveraging because margin borrowing is surging. A compounding leverage model projects FINRA-reported margin debt rising from $1.3 trillion to $1.55 trillion next week, up $250 billion in a month after $100 billion the month before, concentrated in semiconductors and memory. Funding spreads on S&P futures and total return swaps are at multi-year highs, echoing Archegos: a funding or volatility spike could force selling and more margin calls. … Show more
