Skydance Shares Skid Down 25% After Company Issues 471 Million Stock Warrants to Paramount Investors

Shares of Skydance Corp., formed through the merger of Paramount and Warner Bros. Discovery, fell as much as 25% in trading Wednesday. The drop came as the Skydance, led by chairman and CEO David Ellison, distributed about 471 million warrants giving holders of Paramount Skydance’s PSKY Class B shares the option to purchase stock in the new company.

As of 11 a.m. ET, the stock price of Skydance — which began trading Oct. 6 on the New York Stock Exchange under the symbol “SKYD” — was down 25.4%, to $6.78/share. The company’s current market capitalization is estimated at about $34 billion.

Each warrant issued to PSKY holders initially allows them to buy one share of Skydance for $12. If all of those warrants were exercised, that would raise about $5.65 billion for the company, while it would also increase the share count and dilute ownership of current shareholders. It’s not known how many warrants have been exercised so far.

In connection with Skydance’s distribution of stock warrants to PSKY holders, the NYSE announced after market close Tuesday that it will adjust the official closing price of Skydance’s Class B common stock downward by $0.19368 per share (from approximately $9.27 to approximately $9.07) based on the official closing price of the warrants of $2.20 (trading on NYSE under “SKYD WS”).

The warrants issued to PSKY shareholders are intended to provide them the opportunity to purchase shares of Skydance’s Class B common stock “on similar terms” to those offered to the parties in the $47 billion equity syndicate backing the Warner Bros. Discovery deal, including David Ellison; his father, Larry Ellison; Gerry Cardinale, head of RedBird Capital Partners; LionTree; and the sovereign wealth funds of Saudi Arabia, Qatar and Abu Dhabi. Those equity investments in SKYD were priced at $12 per share.

While the movement of Skydance’s stock price Wednesday has more to do with the issuing of the stock warrants, Wall Street has not been bullish on the combined Paramount-Warner Bros. The company will have pro-forma annual revenue of nearly $70 billion — but it also will have to deal with almost $80 billion in net debt.

The Paramount-WBD deal, valued at $111 billion including the assumption of WBD debt, brings together two major studios, TV networks including CBS, CNN, Comedy Central, MTV and TBS, and streaming services Paramount+ and HBO Max.

Last week, after the deal closed, Ellison and co-CEO Ynon Kreiz (former chief of Mattel) announced their senior executive leadership team for the new Skydance.