Paramount shares pop after BDT Capital bets on the media giant’s key shareholder

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 equity investment from BDT Capital Partners, an affiliate of BDT & MSD Partners.

Some Buffett watchers noticed a curious connection with the news. BDT & MSD Partners’ chairman and co-CEO is Byron Trott, who has long been known as Buffett’s preferred and trusted banker. It was Trott who suggested that Buffett throw a $5 billion lifeline to Goldman Sachs during the 2008 financial crisis.

The connection didn’t end there. Buffett’s Berkshire Hathaway is actually Paramount’s biggest institutional investor with a stake of 15.4%, according to FactSet. Berkshire initially took the stake in the first quarter of 2022, and the bet is worth about $1.32 billion after Paramount’s recent sell-off.

Paramount has slid more than 30% since the start of the second quarter after its quarterly earnings and revenue missed analyst estimates, and the CBS parent slashed its quarterly dividend.

“So what we now have here is Trott having a say on what happens at NAI. And NAI having a say in what happens to Buffett’s 15% stake in PARA,” Don Bilson, head of event-driven research at Gordon Haskett, said in a note. “Where this goes is TBD but with Buffett and his banker in the mix, this situation is more interesting today than it was when the week began.”

‘Not good news’

Asked about Paramount at Berkshire’s annual shareholders meeting early May, Buffett, 92, struck a negative tone about the big dividend cut, while signaling his pessimistic outlook for the streaming business.

“It’s not good news when any company passes its dividend, or cuts its dividend dramatically,” Buffett said. “The streaming business is extremely interesting to watch … there’s a lot of companies doing it. And you need fewer companies or you need higher prices. And, well, you need higher prices or it doesn’t work.”

It was unclear if it was Buffett who bought the Paramount position or his investing lieutenants, Ted Weschler and Todd Combs, each of whom oversees $15 billion at Berkshire.

Upgrade from Loop

Loop Capital on Friday upgraded Paramount to a hold rating from a sell in light of the BDT investment. The Wall Street firm said the bull case is that the financial pressure will force Paramount to find a buyer and shareholders will achieve private market value.

“While we still believe a turnaround of PARA will be a challenge, investors’ perception of the company could change with a motivated seller, clever bankers, and Berkshire’s purse strings,” Loop Capital said in a note.