While much of our attention on Paramount (NASDAQ:PARA) has been focused on its deal with Skydance and the various attempts by others to get in on that action, there have been other developments at Paramount as well. In fact, the media company announced plans for a new streaming joint venture and some upcoming job cuts, all of which took the luster off yesterday’s dealmaking and sent shares down nearly 3.5% in Tuesday afternoon’s trading session.
Reports note that the cuts may not actually happen but are set up as a plan B of sorts should the sale not go through. The tripartite “Office of the CEO” currently running Paramount laid out the plans in question, and the centerpiece of that plan was a $500 million cost-cutting effort along with plans to “divest non-core assets.”
What’s more, that $500 million cut is just a starting point, with more cuts likely to follow in August when the next shareholder’s meeting will go live. There’s also been a significant amount of interest from other streaming platforms about setting up a joint venture with Paramount, as Paramount currently has over 70 million subscribers to its credit but continues to lose money regardless.
A Reverse Poison Pill?
Perhaps Paramount would be able to save some of that $500 million by cutting back on its CEO count, but as it turns out, the whole thing may not be needed anyway. As mentioned previously, this is a Plan B concept in case the sale doesn’t go through. With the only real holdup right now being Shari Redstone, whose National Amusements controls Paramount, this could be a bit of a “reverse poison pill” effort designed to force Redstone’s hand.
While a poison pill is normally used to discourage a takeover, this one would be used to encourage it instead. Either take the payoff and let Skydance in, or refuse and watch Paramount get cut down to size in a fury of cost-cutting measures.
Is Paramount Global a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on PARA stock based on two Buys, eight Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. After a 17.43% loss in its share price over the past year, the average PARA price target of $12.50 per share implies 1.3% upside potential.
