Paramount Skydance Raises WBD Bid to $31, Amplifying Leverage Fears

What happened

Paramount Skydance announced a revised all-cash bid of $31 per share for Warner Bros. Discovery during its Q4 2025 earnings call, up from the previous $30 offer. This move underscores management's aggressive pursuit of scale through M&A, despite ongoing streaming turnaround efforts and a $3B+ cost-savings program. DeepValue's report highlights that PSKY's balance sheet is already strained, with $13.6B in long-term debt and limited asset cushion from streaming assets like Paramount+. The increased bid, if successful, could push pro-forma leverage toward ~7x EBITDA, raising refinancing risks and crowding out content investment. While management portrays this as strategic growth, the higher price tag exacerbates financial vulnerabilities without clear near-term upside.

Implication

Investors face heightened risk as the revised $31 per share bid increases potential debt load, aligning with DeepValue's warning of LBO-style tail risk that could push leverage to unsustainable levels. This move diverts focus from organic execution, such as delivering $3.5B in 2026 adjusted operating income and managing Paramount+ price hikes, which are critical for streaming profitability. If the deal closes, PSKY's equity could become a high-risk stub with limited downside protection, given asset valuations already near impairment thresholds. Conversely, if the bid fails, management's credibility on capital allocation may suffer, yet avoiding the deal could reduce near-term leverage overhang. Overall, the bid reinforces a negative risk-reward skew, supporting DeepValue's 'POTENTIAL SELL' rating until clearer execution wins emerge.

Thesis delta

The revised bid to $31 per share confirms management's willingness to pursue high-leverage M&A, aligning with the DeepValue report's bear case where such a deal could destroy equity value. It does not materially shift the base thesis but strengthens the downside scenario by increasing financial strain without addressing execution risks in streaming or cost savings. Investors should watch for deal outcomes and early 2026 streaming metrics to reassess the thesis, as failure to de-leverage or hit targets could trigger capital impairment.