It doesn't appear that Wall Street is reacting super-enthusiastically to "Warnamount," the new slanguage that just emerged following Axios' report Wednesday that Warner Bros. Discovery CEO David Zaslav sat down earlier this week to discuss merger with Paramount Global chief executive Bob Bakish.
For starters, NextTV.com reports stock prices for both companies are (further) down since the news broke -- just over 6% for Paramount and about 4.5 % for WBD.
Describing the possible Warnamount outcome as a result of "desperate times for media companies leading them to explore desperate measures," MoffettNathanson analyst Robert Fishman conceded a deal would produce synergies across linear networks, sports rights portfolios, subscription streaming platforms and news.
But besides adding more than $15 billion of additional debt to Warner's already leveraged books, the merger would cause WBD to pay a premium for yet more declining linear networks and limited IP, while also recouping deceptively low cost savings from shutting down Paramount Plus.
"As pressure mounts from growing secular linear TV advertising headwinds, cord-cutting acceleration and a weaker macro backdrop putting more burden on sustainable cash flows, and leverage moving in the wrong direction for PARA, we still question why any company would try to catch a falling knife? What is the rush with the likelihood of waiting for an even cheaper price if a real advertising recession transpires?," Fishman added.
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