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Here’s Why Skydance Shares Are Down 8%

adminOctober 7, 20263 Mins read1

Topline

Shares of Skydance Corporation, Hollywood’s newest major media conglomerate that formed Tuesday after the merger of Paramount and Warner Bros. closed, are down 8% on Wednesday as analysts warn of volatile trading.

Skydance shares have fallen since the newly merged company debuted on the New York Stock Exchange on Tuesday. (Genaro Molina/Los Angeles Times via Getty Images)

Los Angeles Times via Getty Images

Key Facts

Shares of Skydance are down about 8% as of 1:15 p.m. EDT on Wednesday, trading at a price of $8.79.

The new entity began trading Tuesday on the New York Stock Exchange under the ticker SKYD, after the former Paramount Skydance Corporation (PSKY) stopped trading once markets closed on Monday.

TD Cowen analysts Doug Creutz and Mei Lun Quach wrote in a note shared with Forbes they recommend investors hold their shares, saying they remain “quite cautious on the ability of the company and its management to avoid integration and execution problems that have bedeviled other major media mergers.”

The analysts wrote they are skeptical Skydance management can create value from the merger when “so many other major media deals have failed,” also pointing to the “mixed reputation” new co-CEO Ynon Kreiz had as Mattel’s chief executive, where he “did not do a great job of investing in growth opportunities.”

Raymond James analysts said in a note they expect “potentially volatile trading” following the merger closure, citing revenue pressure from overlapping streaming subscribers, though they said the addition of Kreiz as co-CEO will add “experienced operational leadership.”

Skydance stock fell more than 2% on the company’s first day of trading Tuesday.

skydance merger finally closed

The Paramount-Warner Bros. merger closed Tuesday, creating Skydance Corporation, a new Hollywood conglomerate led by David Ellison. The merger puts a lengthy list of major properties under one umbrella, including the two storied film studios, as well as networks like CNN, CBS and HBO. The merger, which many in the entertainment industry feared, faced pushback from those who worried it would kill jobs in Hollywood and opposed the centralization of news outlets under one company controlled by a billionaire family. Some Democratic attorneys general fought the merger, but ultimately settled with Paramount last month. Rob Bonta, California’s attorney general, said following the settlement the company had agreed to an “enforceable commitment to significantly increase” production in the United States, specifically in Los Angeles, which he said would lead to “more jobs, more economic activity.” David Ellison has also rebuffed concerns about owning multiple news properties, vowing they would have “complete” editorial independence. The settlement with states also requires Skydance to create a “News Editorial Independence Board” that will monitor news operations at CNN and CBS. “For absolute clarity, we have not talked to any political leader of any party about news, other than to say that we want to be in the truth business and we want to be in the trust business,” Ellison told a reporter who asked about his relationship with President Donald Trump on Tuesday.

big number

30. That’s how many movies Skydance has committed to releasing per year following the merger. Under the terms of its settlement with state attorneys general, if Skydance misses the 30-films-per-year target, it will be forced to divest from production company Miramax. Ellison said Tuesday the company will not pull back on “creative resources,” saying it will “manage the schedule appropriately” to release the required number of films in a way that maximizes profitability for each.

what to watch for

Skydance has already suggested layoffs are on the way. In a memo to employees sent shortly after the merger closed, Ellison and Kreiz said the merger will force the company to make “difficult decisions that affect our workforce.” The company has vowed to cut $6 billion in costs over the next three years.

forbes valuation

We estimate David Ellison’s net worth to be at least $1 billion, largely sourced from his father, Larry Ellison, whose $181.6 billion fortune makes him the eighth-wealthiest person in the world.