Shares of Paramount Global (PARA) are up 14% today, to $17 and change - after reports of a serious buyer who is reportedly "kicking the tires" about an acquisition of all or part of the media group.
What's important for us is that the news sent the stock slicing through resistance levels at the 200-day moving average, where the stock stalled in recent days:
You need a scorecard to follow big acquisition deals, so here goes...
According to recent media reports, a pair of deep-pocketed firms - Skydance Media, and Redbird Capital - would combine forces to swallow Paramount Global, by acquiring Paramount's controlling shareholder National Amusements.
Just to make it more interesting, the players on opposite sides of this deal are the sons and daughters of billionaires:
- National Amusements is led by Shari Redstone, who became the controlling shareholder when her father Sumner Redstone died in 2020.
- Skydance Media is led by David Ellison, the 40-year old son of Oracle's billionaire founder Larry Ellison.
There's no word yet on a post-acquisition strategy by the presumed acquirers. Any acquisition has to consider all the assets Paramount owns - broadcasting stations, a bevy of cable properties, a movie studio, a valuable catalog of films, not to mention all the scripted, unscripted, and news programs you've ever seen on the CBS-TV network.
So it'll be interesting to see if a buyer wants to keep those assets together, or slice-and-dice them for sale to the highest bidders.
One other thing to keep in mind...
Now that one buyer is reportedly making a bid for Paramount, it may compel other buyers to come off the sidelines.
It's been years since there's been a good old fashioned bidding war for a media property like Paramount. But I think now is as good a time as ever to expect one to breakout in the months ahead.
We won't know whether any of this will turn out to be true or not, except with the passage of time.
One thing we do know is true...is that Paramount is still undervalued. As noted when I recommended the stock, PARA's book value is $33.
So even with the stock's rise in past weeks from $10, to last week's goodBUYs purchase price of $15.50, and now $17...Paramount's shares still have a long way to go, with or without a buyout deal.
Should I Buy More?
With all that in mind, I'm going to add 100 more shares at the current $17+ price to the goodBUYs portfolio.
Together with last week's initial entry of 48 shares, it will bring the average entry price of the portfolio's shares to around $16.60.
No doubt next week the stock will probably give back some of today's gains. Now that PARA's stock is above its 200 day moving average, it's not uncommon for its shares to give back some of its gains as it moves above the edge of the 200 day average.
But if PARA is "in play" (to use the lingo of investment bankers), there's a lot of potential upside to at least $25 and a lot higher, in my opinion. But if the whole thing falls apart and PARA falls back to, say, $13...the downside risk is roughly 5% of the portfolio's current value.
For a stock that's being heavily shorted, with M&A talk in the air, and still trading at half of its plain ol' book value per share...that seems like an OK risk to take.
Best of goodBUYs,