Paramount Shares Rebound Over 5% on News of Cash Infusion
Shares of Paramount Global gained 5.3% in morning trading Friday following news that its controlling shareholder, Shari Redstone’s National Amusements, pulled in a $125 million investment.
The stock added 75 cents to $14.83 after the opening bell. The shares ended Thursday down a whopping 39% since Paramount Global slashed its dividend by 79% amid a cash crunch on May 6.
The deal will see BDT Capital Partners, an affiliate of merchant bank BDT & MSD Partners, receive preferred equity in National Amusements. The cash infusion will help Paramount, formed when CBS and Viacom combined in 2019, steady itself as it navigates the shift from cable to streaming.
The company’s streaming losses reached $511 million in the first quarter of this year and it’s been going through major restructuring to save cash, including shutting down MTV News earlier this month.
“The investment will position NAI for sustainable growth and further post-pandemic recovery in its underlying operations as movie theater attendance continues to increase,” National Amusements said in a statement. It plans to use the part of the funds to cut its interest expenses and pay down both short-term and long0-term loans.
“NAI has conviction in Paramount’s strategy and execution, and we remain committed to supporting Paramount as it takes the necessary steps to build on its success and capitalize on the strategic opportunities in our industry,” Redstone said in the statement.
The dividend cut dramatically reduced Redstone’s income, The Wall Street Journal reported, noting the infusion of cash means National Amusements won’t have to sell part of its stake.
As of March 31, National Amusements held 27% of the company’s stock, according to a regulatory filing.
Yet far from selling, Redstone increased her personal holdings by 165,000 shares on May 16, a separate regulatory filing shows, after the stock price had dropped about 34%.
Paramount has been exploring the sale of some of its vast holdings, including BET Media Group in an effort to generate cash. Tyler Perry, retired basketball star Shaquille O’Neal and the rapper Curtis Jackson, who performs as 50 Cent, are reportedly vying for the storied cable network.
Loop Capital analyst Alan Gould upgraded his rating on the stock to “Hold” from “Sell” on news of the cash infusion, but kept his price target at $14. He outlined a “bull case” for the shares that envisions Paramount selling at least some of its assets, and a “bear case” where the company is unable to find a buyer for its cable properties.
The upgrade came as Gould said he no longer sees the downside in holding the shares as being “much greater than the upside.”
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