Paramount shares rise after Buffett’s Berkshire Hathaway raises stake

Paramount Global‘s stock got a boost Tuesday after Warren Buffett’s Berkshire Hathaway upped its stake, a fresh signal that the media and entertainment company could be an acquisition target.

Berkshire disclosed in public filings late Monday that it now owns more than 91 million shares in Paramount. Buffett’s firm first disclosed its new stake in Paramount in May.

Paramount’s stock rose more than 10% Tuesday.

The increased position makes Berkshire the largest outside investor of Paramount’s class B shares at around 15%, or worth about $1.7 billion, as of Monday’s closing price, Wells Fargo & Co. analyst Steven Cahall said in a note.

Paramount is controlled through its class A shares by National Amusements, chairman Shari Redstone’s holding company.

The disclosure of the initial stake had a similar affect on Paramount’s share in May.

Paramount owns “Top Gun: Maverick” movie studio Paramount Pictures, as well as the broadcast network CBS, cable channels including MTV and VH1, the premium network Showtime, and fledgling streaming service Paramount+.

The company reported earlier this month that Paramount+, its answer to other premium streaming services like Netflix and Disney+, added 4.6 million subscribers, bringing its total to 46 million customers.

KeyBanc Capital Markets said in a research note Tuesday that it interprets Berkshire’s increased position as a sign that the firm either believes Paramount will be successful in the streaming wars, or that it’s a likely acquisition target.

“We believe a more realistic outcome is Paramount is acquired by a competitor,” KeyBanc said in Tuesday’s research note, citing likely buyers as technology or media companies that could use Paramount’s film studio and library to become a top competitor.

Paramount had missed analyst expectations when it reported its third-quarter earnings earlier this month, with its quarterly revenue dropping 5% compared to the prior year as it continued to suffer from cord cutting and falling advertising revenue.

In particular the company noted that its advertising revenue was down as macroeconomic headwinds began to hit. The media industry is bracing for a downturn in advertising. Earlier on Tuesday Warner Bros. Discovery CEO David Zaslav said the ad market is weaker now than at any point during the coronavirus pandemic-caused slowdown of 2020.