Shares of Paramount Global surrendered early gains Friday, closing down 1.6% at $13.05. They initially got a bit of a pop from the FCC‘s long awaited approval of the merger wtih Skydance Media. But investors remain cautious as the combined entity’s basic strategy on key fronts from cable to streaming to content spend remains unknown. Details will come after David Ellison’s company dots the i’s and crosses the t’s to formally close the deal over the next few weeks.Shares of Paramount are trending up in mid-morning trade Friday after long-awaited FCC approval for its merger erased a big question mark hovering over the company’s future, but amid ongoing uncertainty about its strategic plans under Skydance Media.The stock is up about 1% to $13.38. It was a bit higher than that pre-market. The deal calls for David Ellison’s company to pay $4.5 billion to buy out a chunk, but far from all, of the Class B shares for $15 each.FCC approval — authorizing the transfer of 28 licenses for Paramount owned and operated CBS stations to the Skydance-led ownership group — was the key last step to an official close, which is expected over the next few weeks.“Now that the long, drawn-out sale process is finally nearing its end, Skydance leadership is poised to take control. With that, the real work begins — rebuilding Paramount, addressing the critical strategic questions ahead, and charting a path toward a more sustainable and competitive future,” says MoffettNathanson analyst Robert Fishman in an early reaction.“With closure of the deal now assured, we expect investor attention to turn to new ownership’s plans to improve profitability at the combined company,” notes TD Cowen’s Doug Creuz.Earnings season is underway. It’s not clear whether the deal will be formally closed before Paramount’s (still unannounced) second quarter report likely in early August, Creuz said, but, “we certainly expect to receive at least some clarity on plans by the Q3 reporting date in November.” It’s hard for analysts to model until they do. He has a “hold” rating on the stock.The new management team is taking shape under incoming CEO David Ellison and President Jeff Shell. Along with division heads, the company needs to find a replacement for chief financial officer Naveen Chopra, who recently exited. Andrew Warren is currently serving as interim CFO. Of the current Paramount CEO troika, CBS chief George Cheeks is expected to remain. Chris McCarthy will be exiting, as likely will Brian Robbins.Perhaps the most pressing question surrounds the new ownership’s plan for Paramount’s linear networks. Rivals Comcast and Warner Bros Discovery are in the process of spinning them out. That said, “we suspect the Ellisons did not purchase Paramount in order to break it up for parts,” said Creuz.Paramount, like the rest of the media industry, is grappling with declining linear assets. “We remain eager to learn whether Skydance intends to stay in the cable network business, or whether a spin and/or possible combination with other portfolios is on the table,” says Fishman.Sports rights are a question, most immediately the NFL, which has a change-of-control clause in its Paramount contract that will trigger an early renegotiation when the Skydance deal closes. Fishman finds it unlikely the league would forgo an opportunity to extract greater value, which could mean either “a larger annual payment or likely some other type of value transfer.”Investors are eager for insight into the merged company’s streaming strategy around Paramount+ from external partnerships to bundling to licensing. Does Pluto “serve as an on-ramp to Paramount+, or is it positioned for a potential sale? Will there be a meaningful step-up in content investment?” asks Fishman. And more broadly, if, or how much, will Skydance ramp up overall content spending in a way that the debt-constrained Shari Redstone-owned company could not?Deadline lays out some of the biggest unknowns here.The FCC approved the deal after a review of over 250 days and amid plenty of controversy as Present Donald Trump simultaneously sought, and achieved, a settlement in a questionable lawsuit he brought against Paramount’s CBS News and 60 Minutes. The FCC greenlight arrived just days after the $16 million settlement closed out the suit.The merger will see the Ellison family, with Gerry Cardinale’s RedBird Capital, acquire Redstone’s family holding company National Amusement, which holds a controlling interest in Paramount, for $2.4 billion. Skydance is offering $4.5 billion in cash to other Paramount shareholders to acquire some Class A and Class B shares at, respectively, $23 and $15.Paramount will then acquire Skydance in a $4.75 billion all-stock merger.At the close, the Skydance investor group will own 100% of New Paramount Class A Shares and 69% of outstanding Class B shares — or about 70% of the pro forma shares outstanding.
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