The Paramount Merger Was a Bad Deal for Old Shareholders. Buying the Stock Is a Good Bet for New Ones.

Paramount Studios in Los Angeles (Eric Thayer/Bloomberg)

The stock looks like a cheap play on Paramount’s revival under new CEO David Ellison.

PSKY

Paramount Skydance Corp. Cl B

1-Year Price Chart

Created with Highstock 2.1.8

$10.51

as of market close August 8, 2025

Market Cap

$11.0 B

NTM P/E

8.1

Div Yield

0%

Beta

0.70

52 Week Range

$9.95

$13.59

Skydance Media has completed its purchase of Paramount, and now David Ellison, the son of Oracle’s Larry Ellison, has a chance to do what once seemed impossible—revive the ailing media company. Investors might want to consider going along for the ride.

Paramount’s stock has been a disaster over the past decade. Shares have dropped 75%, weighed down by legacy media and all of its problems—cord-cutting, atrophying cable networks, and a tough advertising environment. Along the way it burned investors including Warren Buffett, whose Berkshire Hathaway may have taken a 50% hit on an original $3 billion position bought in 2022 at about $30 a share and sold two years later. “I was 100% responsible for the Paramount decision…we lost quite a bit of money,” Buffett said at the 2024 Berkshire annual meeting.

But a new era is coming with David Ellison and his family. The new company, called Paramount, a Skydance Corporation, has a set of high-profile assets, led by the CBS TV network; a number of CBS stations; the Paramount movie studio; a handful of cable networks including MTV, Nickelodeon, and Comedy Central; and the streaming platform Paramount+, and Ellison appears to have the will and the cash to make a real go of it. Buying Paramount stock now means investing alongside one of the world’s richest families in a business that Ellison is determined to make work.

“Ellison appears to be positioning the company to meaningfully invest for the future,” wrote Richard Greenfield, the media analyst at Lightshed Partners.

There wasn’t a lot to like about the deal that merged Paramount and Skydance. The holders of the publicly traded Paramount Class B shares got cashed out of about half their stock at $15 a share and got stock in new Paramount on a share-for-share basis for the other 50% of their holdings. The Redstone family, which controlled Paramount via voting A shares, got cashed out at a big premium to B holders, as did public holders of the A stock. A fairer deal would have paid all holders equally, as media mogul John Malone has done in recent years in deals in which he held supervoting stock.

Paramount also appeared to overpay for Skydance, a small player in the entertainment business. It’s projected to have about $2.3 billion in revenue this year, against $28 billion for Paramount, and $275 million of earnings before interest, taxes, depreciation and amortization, or Ebitda, versus more than $3 billion for Paramount, based on financial projections last year. Paramount bought Skydance as part of the transaction, paying more than $3 billion in stock, a relatively high price.

There are now about one billion shares outstanding, up from about 650 million before the deal, and public investors own about 300 million of them. The market value of the company is $11 billion, plus some $10 billion of net debt. The complex structure of the deal gave Skydance a 70% economic stake in Paramount and 100% voting control.

The fact that the deal only got a regulatory green light after CBS made a controversial settlement in July with President Donald Trump over a 60 Minutes episode that involved a $16 million payment to Trump’s future presidential library also left a bad taste in some investors’ mouths. The shares were down 19% this past week to $10.51, not far above the 52-week low of $10.

That is all in the past—and there’s a lot to like about the company now that the deal is done. David Ellison, 42, an accomplished pilot and film buff, is the new CEO. The company, which has a new ticker symbol, PSKY, also gets the deep pockets of the Ellison family, which controls Skydance. Larry Ellison’s net worth—mostly Oracle stock—has been estimated by Bloomberg at $300 billion, second only to Elon Musk.

David Ellison might be the right leader at the right time. Despite his lack of experience running a company of Paramount’s size, he brings an outsider’s perspective and tech sensibility to an industry that has long been badly run by overpaid veterans who let Netflix come to dominate the business. And he seems to have a strong vision for where he wants the company to go. In a letter posted on Thursday when the deal closed, Ellison vowed to make Paramount into a “leaner, faster, smarter and more agile company.”

When the deal was announced last July, Paramount said it aimed to cut costs by $2 billion annually, and Ellison wrote on Thursday that he had “greater confidence” in the company’s ability to “not only achieve—but meaningfully exceed” that target. Paramount recently signaled a willingness to cut costs by canceling the Stephen Colbert late-night show next year and saving a reported $40 million annually. (Some observers blamed politics for the cancellation.)

But it isn’t all about cost-cutting. There has been speculation that Ellison might spin off the cable networks, replicating Warner Bros. Discovery’s strategy, or merge them with another company’s cable properties. Another option is to simply harvest the free cash flow and reinvest it elsewhere in the company. Paramount could also consider a sale of the company’s valuable group of 14 CBS TV stations, including flagships in New York and Los Angeles.

Judging from Ellison’s letter, he seems inclined to double down rather than pare back the asset base. And with full control, so much money behind him, and a still highly profitable Paramount to run, Ellison is under no pressure to sell anything. Instead, he has the leeway to execute his strategy as he sees fit. Ellison also said Paramount would “supercharge” creative engines while “scaling” the flagship streaming service Paramount+ and “increasing investment in premium, exclusive content.”

That includes potential investments in Paramount+, which is undersized relative to rivals even with some 78 million subscribers. The service’s strategy has been to focus on fewer, high-quality shows like Landman, unlike Netflix, which produces an enormous amount of content. And Lightshed’s Greenfield sees potentially more investing in sports, where CBS already has a big commitment to the National Football League. Thankfully, the Ellisons have the money to make it work.

“‘While Paramount and its predecessors were always owner-controlled, Ellison brings one of the richest families in the world into the equation and more importantly, an appreciation that technology is just as important as content,” Greenfield wrote.

Wall Street still needs to be persuaded. Just three out of 25 analysts covering Paramount stock rate it a Buy, with about 10 outright Sells, according to Bloomberg, making Paramount a contrarian bet in an out-of-favor industry.

Investors will be looking for more clarity on the Ellison playbook and financials in the coming weeks because the company hasn’t updated its guidance since last summer, when it projected $4.1 billion of operating income in 2026 and $4.5 billion in 2027. Paramount had paid a dividend of about 2%, but the company hasn’t set a new dividend policy yet.

Ultimately, the stock represents a cheap play on Paramount’s revival under Ellison. The company is valued at about six times annualized operating income of about $3.5 billion in the first six months of 2025—an inexpensive valuation in an admittedly low-valued industry. The stock even looks like it has a chance to stay in the S&P 500 index.

It’s even possible that the Ellison family could decide to buy out the public shareholders: The public float in Paramount totaled just over $3 billion, only about 1% of the Ellison family’s reported net worth.

With so many ways to make Paramount work, it’s a good time to make a bet on the stock.

Write to Andrew Bary at andrew.bary@barrons.com