Paramount Global (NASDAQ:PARA) stock and other Hollywood studios rose slightly on word of a tentative agreement in the writers’ strike.
Since the strike began May 2, PARA stock has fallen 46%. It’s the worst performance among the studios because Paramount is dependent on media for its profits. The company owns the CBS Television Network, Viacom cable stations, and the Paramount Plus streaming service.
No details have yet emerged on the deal, which must be ratified by Writers Guild of America (WGA) members. The company also faces a continuing strike by the Screen Actors Guild (SAG).
Paramount Global opened this morning at $12.82 per share, a market capitalization of $8.35 billion. PARA stock’s price movement on the chart has been a little erratic this morning, but as of this writing sits a little in the green.
Weakness Continues
In the post-strike era, Paramount offers the most risk and the most potential reward in entertainment. It has been weakened the most by the move to streaming and is the smallest by far in market cap.
The stock is also controlled by non-executive chair Shari Redstone, who won a long battle for control of her late father, Sumner Redstone’s estate. This means the company can’t be sold without her approval.
On the other hand, Redstone is now 69 and could be persuaded to sell. Redstone was on the cover of the Forbes 400 issue in 2019. Her fortune was recently estimated at just $500 million.
The long struggle over the estate kept Paramount from taking action as broadcast networks and cable lost ground to streaming services run by Cloud Czars, Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). It also lost ground to players rich in infrastructure like The Walt Disney Co. (NYSE:DIS) and Comcast (NASDAQ:CMCSA).
A Cloud Czar could now pick up Paramount for the equivalent of seat cushion money, although it would still have to get a deal past regulators.
PARA Stock: What Happens Next?
The costs of the deal must still be calculated, and the actors’ strike must still be settled before investors can estimate the true value of Paramount’s assets. The market reaction to the tentative deal was thus muted.
As of this writing, Dana Blankenhorn held LONG positions in AMZN and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
