Paramount Global Shares jumped more than 5% on Friday after an investor known as Warren Buffett’s favorite banker piled into the media company’s controlling shareholder.
National Amusements, Paramount’s majority voting shareholder, announced Thursday afternoon that it has entered into an agreement for a $125 million preferred stock investment by BDT Capital Partners.
Some Buffett watchers have noticed a strange relationship with the news. BDT Capital’s Chairman and Co-CEO is Byron Trott, long recognized as Buffett’s favorite and trusted banker. It was Trott who suggested that Buffett put a $5 billion lifeline into Goldman Sachs during the 2008 financial crisis.
The connection did not end there. Buffett’s Berkshire Hathaway is actually Paramount’s largest institutional investor with a stake of 15.4%, according to FactSet. Berkshire initially acquired the stake in the first quarter of 2022, at a stake of about $1.32 billion after Paramount’s recent sell-off.
Paramount has fallen more than 30% since the start of the second quarter after its quarterly earnings and revenue missed analyst estimates, and parent company CBS cut its quarterly dividend.
“So what we have now here is that Trot has a say in what happens at NAI. And NAI has a say in what happens to Buffett’s 15% stake in PARA,” Don Bilson, head of event-based research at Gordon Haskett, said in a note. Where this goes is TBD but with Buffett and his bankers in the mix, this situation is much more interesting today than it was when the week started.”
“Not good news”
Asked about Paramount at Berkshire’s annual shareholder meeting in early May, Buffett, 92, struck a negative tone about a big dividend cut, while noting his pessimistic view of the streaming business.
“It’s not a good idea for a company to pass on its dividend, or cut its dividend significantly,” Buffett said. “Watching live is very interesting… There are a lot of companies doing that. And you need fewer companies or you need higher prices. Well, you need higher prices or it doesn’t work.”
It wasn’t clear if it was Buffett who bought the Paramount position or his investing assistants, Ted Wechsler and Todd Combs, each overseeing $15 billion in Berkshire.
Upgrade from Loop
Loop Capital on Friday upgraded Paramount to a “suspended” rating from “sell” in light of the BDT investment. The upside, the Wall Street firm said, is that financial pressure will force Paramount to find a buyer and shareholders will realize private market value.
“While we still believe PARA’s turnaround will be challenging, investors’ perception of the company could change with an enthusiastic seller, savvy bankers, and Berkshire portfolio chains,” Loop Capital said in a note.