Happy Monday War & Peaceniks! It’s Earning Season and the waters are choppy!
The quarterly earnings reports of the major players in Media and Tech kicked off with some interesting ups and downs. But then things got weird on mount Paramount, when just dozens of hours before their earnings call, later today, controlling shareholder Shari Redstone decided to prove the might behind her title - leaking news that CEO Bob Bakish was getting the axe, to be replaced by… nobody.
As of this moment, there’s been no absolute confirmation one way or another of said shit-canning, but the board has announced Bob won’t be on the earnings call today, which is a pretty good indication of where this is all going.
Apparently Bakish was not sufficiently into Redstone’s preferred exit plan - the deal between Paramount and Skydance, more of an acqui-merger than straight-out purchase, with Skydance (backed by KKR and Redbird’s Saudi cash) paying a premium for Ms. Redstone’s shares for 50% of the company and the remaning shareholders holding on to the remaining 50% and going along for the ride.
Many shareholders agree with Bakish’s less than glowing assessment of the Skydance offer, especially in light of a competing offer from Apollo for more cash that got almost no serious attention from the board. A major holder of shares, Matrix Asset Advisors wrote a poison-pen letter about the deal to the board saying just as much.
The whole Paramount scenario is unusual. And it’s impossible for anyone of us on the outside - or even for most of those on the inside - to know which deal is actually best for shareholders, or even where on the map Paramount will ultimately wind up. Sony and Apollo now seem to be forming a super-group to make a new competing offer, and there’s likely to be more new suitors coming out of the woodworks of Wall Street.
What we DO know is that Paramount’s earnings call is later today, and it is a very strange tactical strategy to shit-can your CEO just hours before you get on the horn with investors to let them know that the company is, in fact, in good hands - especially when you don’t whose hands they are yet.
We DO know that this drama all presages a massive battle with Charter Communications over a carriage renewal for Paramount’s TV assets - a battle that echos the knock-down, drag-out fight between Disney and Charter’s Spectrum Cable last fall. And we DO know that Bakish had handled all the hard negotiations like this in the past. All of which tees up a whole lotta angst for the people and shareholders at Paramount in the coming months, regardless of what happens.
We also know that we are still smack-dab in the middle of earnings season for the first quarter of 2024. The Redstone family agita is a major distraction from a slew of results so far from Netflix, Microsoft, Spotify, Roku, Google, Meta, and Comcast, which are quite telling about the way the winds are blowing in Big Tech and Media right now.
How the results, and spin, from these companies were interpreted and misinterpreted also offer keen lessons in how and how NOT to read earnings reports. First, to know what a company’s earnings report actually says, DO NOT read the headlines about that earnings report. Second, to know what’s actually going on in the Media and Tech Universe, read the actual earnings reports of the companies in it. They are relatively simple documents. They take very little time to read all the way through and, despite sometimes being layered with purposely obtuse language, they legally have to tell you what the fuck is going on inside the company, which will almost always tell you where the company is going.
Here then, are my readings of the actual earnings reports from Big Media & Tech, so far, and what they tell us about the changing shape of the Media Universe…
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