Is Elon Musk Paramount’s Next Big Investor?

Paramount executives are exploring whether to ask Elon Musk for an investment in the studio, Semafor reported, citing unnamed sources, on Wednesday.

The Tesla founder has emerged as “one of a number of wealthy individuals that Paramount CEO David Ellison has considered tapping” to become part of a syndicate of equity investors into the combined company, according to the report, which described the discussions as preliminary and didn’t identify the size of the potential investment.

The talks follow a settlement to resolve antitrust lawsuits from a dozen states led by California and the Writers Guild of America to block the studio’s $111 billion bid for Warner Bros, clearing the way for Hollywood’s next entertainment and media giant. The structure of the deal leaves the studio, which declined to comment, with more than $80 billion in debt and roughly $3 billion in annual free cash flow, figures that will likely handicap the studio’s operations moving forward. If Paramount is forced to devote a substantial share of its cash to interest and debt payments, there’ll be less remaining to finance films and TV shows.

The merger was initially backed by roughly $46.7 billion in equity financing from Larry Ellison, plus $250 million from RedBird Capital. That financing was later spread among a larger group of investors, including Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and Abu Dhabi Investment Authority.

One question surround the potential investment: Will Musk take an additional piece of the existing $46.7 billion commitment? If not, Paramount is exploring an entirely new equity raise. Another investor could spread the financial exposure beyond Larry Ellison while giving Paramount more capital for operations. Under the settlement, Paramount and Warner Bros. must fulfill annual film quotas, with financial penalties and possible divestitures on the table for violations.

Earlier this month, Larry Ellison scrapped plans to sell up to $7.5 billion worth of his Oracle stake. No explanation was given over the decision to cancel the unloading of 50 million shares. He and Musk have long ties, with Larry Ellison investing $1 billion in Musk’s 2022 acquisition of X.

While an equity investment from Musk and other investors avoid Paramount adding more leverage with interest rates on the rise, bringing on the tech billionaire will exacerbate the appearance of possible editorial interference to a deal that’s already sparked intense political furor. If a deal is reached, Musk would be an equity holder in a company that owns CBS News and CNN.