What happened
Shares of Paramount Global (NASDAQ: PARA) were moving higher today after its controlling shareholder secured a $125 million investment, and it got an analyst upgrade on the news.
As of 1:34 p.m. ET, the stock was up 6.3%.
So what
The Wall Street Journal reported last night that Shari Redstone's National Amusements, the controlling shareholder of the entertainment company, received a $125 million investment from merchant bank BDT & MSD Partners.
The news comes at a time when Paramount Global is struggling to turn a profit in the entertainment industry, which is in the midst of a transition to streaming. The company also slashed its dividend in its most recent earnings report from $0.24 to $0.05, a reflection of the challenges it faces as it transitions from a legacy media company that was formerly Viacom and CBS to a streaming business.
The investment in National Amusements means that it won't have to sell its Paramount shares or use them as collateral, helping to shore up Paramount stock in turn.
Loop Capital upgraded Paramount on the news, raising its rating from sell to hold, as analyst Alan Gould said that the bull case involves the company selling at least some of its assets. The capital raise by National Amusements also seems to increase the chances that National Amusement could take some of those assets, like the cable business, private.
Now what
Paramount's first-quarter earnings report shows how much the company is struggling, as revenue declined 8% and a key operating income metric fell 15%.
While many of its peers are also struggling, that doesn't ease the pain for Paramount shareholders. The capital raise by National Amusements could help the company, but at this point, the bull case looks thin.
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