While Warner Bros. Discovery shares soared 11%, as is often the case of a company about to be acquired, while Paramount shares stumbled on news the companies’ merger will take another two weeks to complete.
The stocks’ divergent movement came after news Monday morning of a settlement between Paramount and 12 state attorneys general. A parallel lawsuit filed by the Writers Guild of America was also settled. The agreements pave the way for the $111 billion deal to close, but Paramount CEO David Ellison warned that it would take about two weeks for that final step to occur.
While Paramount’s beleaguered stock jumped 10% earlier in the day, it slumped in the last two hours of the day, possibly on the news that more time is required before the transaction can be completed. Paramount is on the hook for a “ticking fee” of about $7 million a day, payable to WBD shareholders, for every day past October 1 that the deal is not closed. Paramount stock settled at $9.91, its lowest closing price in a month.
Fears of the ticking fee adding up to around $650 million per quarter ahead of a scheduled March 2027 trial date – a not-inconsequential amount for a company worth about $11 billion – shadowed the legal process in recent weeks. The state AGs and the WGA filed suit in July after federal regulators had approved the deal, and gained surprising traction in a series of early court rulings, giving opponents of the merger hope it would be curtailed or even fully blocked.
Wall Street does not take Yom Kippur off, technically, but the usual flow of reactions Monday was muted due to the holiday. Ditto with Hollywood on the Jewish high holy day. Still, a few reactions started trickling in and will surely continue in the days to come. The main sentiment was disbelief at how favorable the terms are to Paramount. While the company agreed to certain commitments to U.S. production and CNN’s independence, they are what merger watchers call “behavioral remedies” and not asset sales or other structural compromises.
“Competition is overrated anyway, just ask Peter Thiel,” wrote TD Cowen analyst Doug Creutz, slyly referring to the tech mogul’s 2014 Wall Street Journal essay headlined “Competition is for Losers.” Labeling his note to clients a “quick take” that preceded California AG Rob Bonta’s press conference, Creutz did indicate he didn’t consider the reports of what Paramount’s concessions to be too onerous. One such clause would require “the possible forced sale of the inconsequential Miramax stake.”
In an X post, Lightshed Partners’ Rich Greenfield called it a “huge win” and “slam dunk win” for David Ellison and Paramount. The company prevailed, he said, by “refusing to cede structural remedies. None of the behavioral remedies will have any meaningful impact.”
Alvaro Bedoya, a member of the Federal Trade Commission from 2022 to 2025, lamented the settlement on X. “Billionaires have yet again bribed, censored, and bullied their way to the top,” he wrote. “As a result, a billionaire media conglomerate closely allied with the president will soon own one of its closest rivals, including some of the nation’s most critical news outlets. Saudi Arabia’s sovereign wealth fund will co-own those outlets, too. Layoffs will follow. People from L.A. to Atlanta will lose their jobs, small businesses will lose their contracts, your cable bill and movie ticket will be even more expensive. Dissent against money and power will be even harder to find.”
