Shares of Paramount Skydance rose about 1.7% in early premarket trading on Monday, offering a brief rebound after a sharp decline in recent weeks.
The stock has fallen in nine of the last ten trading sessions, weighed down by broader market volatility linked to tensions between the United States and Iran, as well as investor concerns about the heavy debt involved in its planned acquisition of Warner Bros. Discovery.
The prolonged selloff has effectively erased the 32% rally recorded late last month, when Paramount secured the deal ahead of rival Netflix.
Currently, the PSKY stock is down about 51% from its September 23 peak.
$111 Billion Deal for Warner Bros. Discovery
On February 27, Paramount announced that the Warner Bros. board accepted its improved offer of $31 per share to acquire the entire company.
The transaction is expected to close in the third quarter, pending shareholder approval.
Warner Bros. Discovery shareholders are scheduled to hold a special meeting on Friday to vote on whether to approve Paramount’s offer or support Netflix’s competing proposal.
Investors Worry About Rising Debt
Despite winning the bidding war, investors have raised concerns about the massive financing required for the acquisition.
Paramount plans to spend around $111 billion, largely funded through debt financing. In addition, the deal includes a $2.8 billion breakup fee payable to Netflix on behalf of Warner Bros. Discovery.
These financial commitments have sparked fears about Paramount’s balance sheet and long-term financial stability.
Credit Rating Downgrade
Earlier this month, Fitch Ratings downgraded the credit ratings of both Paramount Skydance and Paramount Global to junk status.
The rating agency also placed the company on watch for a potential further downgrade, pending greater clarity on the final structure of the acquisition financing and Paramount’s strategy to manage the additional debt burden.
Investors will now be closely watching the upcoming shareholder vote and further details on financing as the company moves forward with the landmark media industry deal.