What Happened?
Shares of multinational media and entertainment corporation Paramount (NASDAQ: PARA) jumped 3.9% in the morning session after reports revealed that the newly-merged company is preparing a bid to acquire rival media conglomerate Warner Bros. Discovery.
This potential move comes just weeks after Skydance Media completed its $8.4 billion merger with Paramount Global, forming Paramount Skydance. According to multiple reports citing sources familiar with the matter, the company is preparing a majority cash offer for the entirety of Warner Bros. Discovery, which owns assets like HBO, CNN, and DC Studios.
The bid is reportedly backed by the Ellison family, including CEO David Ellison and his father, Oracle co-founder Larry Ellison. A successful deal would unite streaming services Paramount+ and HBO Max, creating a stronger competitor to industry leaders like Netflix and Disney+. While no formal offer has been made, the news was received positively by the market.
After the initial pop the shares cooled down to $18, up 2.9% from previous close.
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What Is The Market Telling Us
Paramount’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 21 hours ago when the stock gained 10.3% on the news that the latest Consumer Price Index (CPI) report came in largely as expected, reinforcing investor hopes for an upcoming Federal Reserve interest rate cut. Data from the Bureau of Labor Statistics showed headline inflation for August at a 2.9% annual rate, with core inflation, which excludes volatile food and energy prices, holding steady at 3.1%. While inflation remains above the Federal Reserve's target, Wall Street interpreted the figures as not being high enough to prevent a widely anticipated rate reduction at the central bank's meeting next week.
Analysts note that the Fed's focus has shifted toward the risks of a cooling labor market. With this report being the last key data point before the meeting, the market's conviction for a rate cut strengthened, fueling a broad rally that pushed major U.S. stock indexes to record highs.
Paramount is up 70.1% since the beginning of the year, and at $18 per share, has set a new 52-week high. Investors who bought $1,000 worth of Paramount’s shares 5 years ago would now be looking at an investment worth $605.45.
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