Now on to the main event…

For the life of me, I still can’t figure out the timing of the September 11 leak to The Wall Street Journal that Paramount Skydance, the newly created Big Media company formed by the Ellisons and RedBird Capital, was planning a cash and stock bid for Warner Bros. Discovery. It’s been 17 days, and there is still no PSKY bid forthcoming for David Zaslav’s WBD. My partner Matt Belloni noted recently that Ellison was keeping a very tight circle of trust on the deal, and he might have even submitted it. (Paramount would not confirm it, and a spokesperson told me that the company is now locked down tighter than a prisoner in solitary confinement.) The silence is deafening.

But while I have no idea who fed that information to the Journal, I do know the leak is proving very costly for the Ellisons and for PSKY. These days, the market capitalization of WBD is closing in on $50 billion, up roughly 60 percent since the leak. That’s great for WBD shareholders, but pretty lousy for the prospective buyers, who are now faced with a much more expensive target. “Why would you do that?” one longtime Wall Street M&A banker asked me, rhetorically. “You don’t see me doing that. It’s inexplicable.”

Of course, even if Ellison & Co. succeed in getting Zaz and his savvy board of directors to accept a deal, they would still have to pay a premium. That’s a given in pretty much every M&A deal, especially if it’s going to be a mostly cash deal rather than a strategic, stock-for-stock arrangement, which occasionally happens without any premium required. A few of these come to mind: the Exxon–Mobil deal in ’99; the Daimler–Chrysler deal in ’98; the Bank of New York–Mellon deal in ’07; the Anglo American–Teck Resources deal earlier this year. But they are rare. Much more common are deals where the acquirer pays a decent takeover premium.

In stock deals, the premiums tend to be in the range of 15 percent to 25 percent. In cash deals, the premiums tend to be higher, in the range of 25 percent to 35 percent. In contested takeovers, with multiple parties with a serious intent to win, the takeover premium can be much higher. In the small deal for DallasNews Corporation, which I have been following closely, Hearst’s winning bid of $16.50 in cash was something like a 277 percent premium to the per-share price of $4.39 on the day before Hearst started bidding for the company. That’s a huge outlier, obviously, in large part because DallasNews was a thinly traded, micro-cap company effectively controlled by Robert Decherd, a scion of the founding family.

Most of the time, the two sides do everything in their power to keep the news of the potential deal from leaking, until it’s deemed a “strategic leak,” and then the Journal or the Times gets the call. That way, when the deal is announced, and the target’s stock inevitably trades up to approach the value of what the buyer is offering, the premium doesn’t look too high—a dynamic that satisfies both sides. If the news of the potential PSKY deal for WBD had not leaked, and PSKY could have offered a 35 percent premium above WBD’s September 10 closing price, or roughly $17 per share, few would be able to reasonably complain. But on account of the leak, the WBD stock is already trading at a 60 percent premium to the pre-leak share price. And the WBD share price is pretty much staying there, even though the Ellisons and PSKY still have not made their bid.

It’s not all that clear to me how the Ellisons get the WBD share price to float back to Earth, except perhaps by delaying any bid, perhaps for months. If no bid were forthcoming in the next few weeks, or months, WBD shareholders might begin to feel that a bid may not be coming after all. And all the speculators, or arbitrageurs, might begin dumping their shares, putting downward pressure on the stock. Might this explain why things have gone so silent, so suddenly?

On the other hand, I can imagine that the Ellisons might decide enough is enough, and that the current 60 percent increase in the WBD stock is sufficient premium to get the deal done. I could certainly see a bid at the current market price of WBD, without any additional premium: $50 billion for the equity, plus the assumption of $30 billion of WBD’s net debt. Zaz, of course, will try to gin up a real auction, but I just don’t see anyone else—not Comcast, not Netflix, not Amazon, not Apple—entertaining the whole enchilada. (This is not investment advice.)

At the moment, then, the difference between a 35 percent premium for WBD and a 60 percent premium for WBD is roughly $8 billion—the leak tax, as it were. Maybe the Ellisons don’t care about that $8 billion, and maybe they’re right not to care. After all, Larry Ellison’s net worth has skyrocketed $176 billion so far in 2025, to $368 billion. What’s more, equity investors seem to like the idea of the PSKY deal for Paramount, too. Its stock is up 27 percent, or roughly $5.6 billion, since the leak to the Journal.

I’m not sure analyzing who benefits from the leak gets you very far either. If the leak came from the PSKY crew, that was costly, but it also let the world know that the Ellisons intend to be a big player in Hollywood and media, and might box out other bidders once they saw the stock pop. Could the leak have come from WBD and Zaz world? It seems very unlikely that a shrewd deal guy like Zaz would have started an auction process with a bomb of that magnitude. He likely will, and probably should, make the argument that WBD will create more long-term shareholder value by cleaving itself and having the two parts of WBD float off independently and realize their individual values sometime down the road. And he might be right that the two separate pieces of WBD might one day be worth more than whatever PSKY offers in cash today. But that’s going to be a tough argument to make at this moment, even if he’s right. The bird in the hand is still worth more than two in the bush.

In a sense, then, the leak hurts and helps both PSKY and WBD. But the timing is confounding. My Wall Street sources tell me it’s likely a bid will still be forthcoming; they just don’t understand why it’s taking so long. The truth, of course, is that we are living in unprecedented times and this is merely the latest example.

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