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Paramount Global Class B (PARA)
NASDAQ:PARA
Risk Overview Q4, 2024
Risk Distribution
48% Finance & Corporate
21% Legal & Regulatory
17% Ability to Sell
10% Production
2% Tech & Innovation
2% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Paramount Global Class B Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q4, 2024
Main Risk Category
Finance & Corporate
With 20 Risks
Finance & Corporate
With 20 Risks
Number of Disclosed Risks
42
+22
From last reportS&P 500 Average: 31
42
+22
From last reportS&P 500 Average: 31
Recent Changes
24Risks added
2Risks removed
3Risks changed
Since Dec 2024
24Risks added
2Risks removed
3Risks changed
Since Dec 2024
Number of Risk Changed
3
+3
From last reportS&P 500 Average: 3
3
+3
From last reportS&P 500 Average: 3
See the risk highlights of Paramount Global Class B in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 42
Finance & Corporate
Total Risks: 20/42 (48%)Above Sector Average
Share Price & Shareholder Rights13 | 31.0%
Share Price & Shareholder Rights - Risk 1
Sales of NAI's shares of our Common Stock, some of which are pledged to lenders or otherwise encumbered, could adversely affect the stock prices.Share Price & Shareholder Rights - Risk 2
NAI, through its voting control of the Company, is in a position to control actions that require stockholder approval.For so long as we have a controlling stockholder, our other stockholders, who may have different interests than our controlling stockholder, are unable to affect the outcome of corporate actions requiring stockholder approval.
NAI, through its direct and indirect ownership of our Class A Common Stock, has voting control of the Company. As of December 31, 2024, NAI directly or indirectly owned approximately 77.4% of our voting Class A Common Stock, and approximately 9.5% of our Common Stock. NAI is controlled by the General Trust, which owns 80% of the voting interest of NAI. NA Administration, LLC is the corporate trustee of the General Trust and is governed by a seven-member board of directors, which acts by majority vote (subject to certain exceptions), including with respect to the NAI shares held by the General Trust. Shari E. Redstone, Chairperson, CEO and President of NAI and non-executive Chair of our Board of Directors, is one of the seven directors of NA Administration, LLC and one of two directors who are beneficiaries of the General Trust. No member of our management or other member of our Board of Directors is a director of NA Administration, LLC.
Accordingly, NAI is currently in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending our bylaws, the election or removal of directors and transactions involving a change in control. For example, our bylaws provide that:
- the affirmative vote of not less than a majority of the aggregate voting power of all outstanding shares of our capital stock then entitled to vote generally in an election of directors, voting together as a single class, is required for our stockholders to amend, alter, change, repeal or adopt any of our bylaws;- any or all of our directors may be removed from office at any time prior to the expiration of his or her term of office, with or without cause, only by the affirmative vote of the holders of record of outstanding shares representing at least a majority of all the aggregate voting power of outstanding shares of our Common Stock then entitled to vote generally in the election of directors, voting together as a single class at a special meeting of our stockholders called expressly for that purpose; and - in accordance with the DGCL, our stockholders may act by written consent without a meeting if such stockholders hold the number of shares representing not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted.
In connection with the Transactions, the NAI Company Stockholders, which hold shares of our Class A Common Stock, executed and delivered to the Company a written consent approving and adopting the Transaction Agreement and, to the extent the consent of the Company's stockholders is required therefor, the Transactions,and the delivery of the written consent constituted the necessary approval of the Company's stockholders for the Transactions. The NAI Company Stockholders also are party to the Voting Agreement pursuant to which the NAI Company Stockholders have generally agreed to vote (or cause to be voted) all of the shares of our Class A Common Stock held by the NAI Company Stockholders in favor of certain matters set forth in the Voting Agreement relating to the Transactions.
If the pending acquisition of 100% of the equity interests of NAI by certain affiliates of existing investors of Skydance (the "Skydance Investor Group") is consummated, such acquiring entities will collectively own and control 100% of NAI.
Share Price & Shareholder Rights - Risk 3
We have experienced, and may continue to experience, volatility in the prices of our Common Stock.We have experienced, and may continue to experience, volatility in the prices of our Common Stock. Various factors have impacted, and may continue to impact, the prices of our Common Stock, including variations in our operating results; changes in our estimates, guidance or business plans; variations between our actual results and expectations of securities analysts, and changes in recommendations by securities analysts; changes by any ratings agency to our outlook or credit ratings; market sentiment about our business, including the viability of our streaming business and views related to its profitability; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; changes in management; the announcement or completion of significant transactions by us or a competitor such as the Transactions; events affecting the stock market generally; and the broader macroeconomic and political environment in the U.S. and internationally, as well as other factors and risks described in this section. Some of these factors may adversely affect the prices of our Common Stock, regardless of our operating performance.
Share Price & Shareholder Rights - Risk 4
The loss of affiliation and distribution agreements, renewal of these agreements on less favorable terms or adverse interpretations thereof could have an adverse effect on our business, financial condition or results of operations.A significant portion of our revenues are attributable to agreements with a limited number of distributors. There can be no assurance these agreements will be renewed in the future, or renewed on favorable terms, including terms related to pricing, programming tiers and the types of the rights we grant distributors. The loss of existing packaging, positioning, pricing or other opportunities and the loss of carriage or the failure to renew, or any delay in renewing, our agreements with any distributor, or renew them on favorable terms, could lead to service blackouts, reduce the distribution of our content, decreasing the potential audience for our content and negatively affecting our growth prospects, revenues from both affiliate fees and advertising and our reputation with viewers. The CBS Network provides affiliated television stations regularly scheduled programming in return for the insertion of network commercials during that programming and the payment of reverse compensation. The loss of such station affiliation agreements, which would reduce the reach of our programming and therefore our appeal to advertisers, as well as the renewal of these affiliation agreements on less favorable terms, could adversely affect our results of operations.
Consolidation among and vertical integration of distributors in the cable and broadcast network businesses has provided more leverage to these distributors and could adversely affect our ability to maintain or obtain distribution for our network programming or distribution and/or marketing of our subscription services on favorable or commercially reasonable terms, or at all. Also, consolidation among television station group owners could increase their negotiating leverage. Competitive pressures faced by MVPDs, particularly in light of evolving consumer consumption patterns and new distribution models, could adversely affect the terms of our renewals with MVPDs. In addition, MVPDs continue to develop alternative offerings, and to the extent these offerings do not include our content and become widely accepted in lieu of traditional offerings, we could experience a decline in affiliate revenues.
Our revenues are also dependent on the compliance of major distributors with the terms of our affiliation or distribution agreements. As these agreements have grown in complexity, the number of disputes regarding their interpretation and even their validity has grown, resulting in greater uncertainty and, from time to time, litigation with respect to our rights and obligations. Some of our distribution agreements contain "most favored nation" ("MFN") clauses, which provide that if we enter into an agreement with a distributor and such agreement includes terms that are more favorable than those held by a distributor holding an MFN right, we must offer some of those terms to the distributor holding the MFN right. Disagreements with a distributor on the interpretation or validity of an agreement could adversely impact our affiliate and advertising revenues, as well as our relationship with that distributor.
Share Price & Shareholder Rights - Risk 5
Our stockholders will not be entitled to appraisal rights in connection with the Transactions.Added
Section 262 of the DGCL provides that stockholders have the right, in some circumstances, to dissent from certain corporate actions and to instead demand payment of the fair value of their shares. Stockholders do not have appraisal rights with respect to shares of any class or series of stock if such shares of stock, or depositary receipts in respect thereof, are either (a) listed on a national securities exchange or (b) held of record by more than 2,000 holders, unless the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing.
Therefore, because the shares of our Common Stock are currently listed on Nasdaq, a national securities exchange, and the holders of our Common Stock (other than the Specified Stockholders (as defined in the Transaction Agreement), with respect to shares of Class B Common Stock, and the Specified NAI Stockholders, with respect to shares of Class A Common Stock) will be entitled to elect to receive, in connection with the Transactions, the entirety of their merger consideration in the form of shares of New Paramount Class B Common Stock (i.e., shares of which will also be listed on Nasdaq), holders of our Common Stock (other than the Specified Stockholders, with respect to shares of Class B Common Stock, and the Specified NAI Stockholders, with respect to shares of Class A Common Stock) will not have rights under the DGCL to dissent from, or demand payment for, their shares in connection with the Transactions. NAI, NAIEH and SPV-NAIEH LLC irrevocably waived all dissent rights under the DGCL pursuant to a voting agreement with the Company and Skydance (the "Voting Agreement").
Share Price & Shareholder Rights - Risk 6
Executive officers, directors and affiliates of Paramount may have interests in the Transactions that are different from, or in addition to, the rights of our stockholders.Added
Certain of our and Skydance's executive officers, directors and affiliates may have interests in the Transactions that are different from, or in addition to, those of our stockholders. These interests include the potential continued employment of certain of our and Skydance's executive officers by New Paramount, the potential payment of transaction awards in connection with the Closing and enhanced change in control severance benefits on certain qualifying terminations following the Closing, the potential appointment of certain of our and Skydance's directors as directors of New Paramount and the rights of our and Skydance's executive officers and directors to indemnification by New Paramount and the other surviving entities in the Mergers. These interests may also include the conversion of our outstanding equity awards into equity awards of New Paramount in the New Paramount Merger, following the Closing. In addition, the interests of our executive officers, directors and affiliates may not be the same as the interests of our other stockholders. For instance, the potential payment of transaction awards in connection with the Closing and enhanced change in control severance benefits on certain qualified terminations following the Closing may create incentives for our officers that are different from those of our other stockholders. Furthermore, the board of directors of New Paramount will consist of up to 13 members designated by Skydance prior to the Closing, including David Ellison.
Additionally, pursuant to the NAI Transaction, the NAI Equity Investors agreed to purchase, upon the terms and subject to the conditions set forth in the NAI Stock Purchase Agreement (as defined in the Transaction Agreement), all of the outstanding equity interests of NAI from the NAI Shareholders (as defined in the Transaction Agreement). As a beneficiary of the NAI Shareholders, Shari E. Redstone ("Ms. Redstone") will receive a portion of the proceeds from the NAI Transaction. Ms. Redstone is the non-executive Chair of our Board of Directors. As of December 31, 2024, Ms. Redstone was the beneficial owner of 52,226 cash-settled Class A Common Stock phantom units, 61,920 cash-settled Class B Common Stock phantom units, and 617,409 shares of Class B Common Stock, which includes 177,326 vested, deferred Paramount RSU Awards. Ms. Redstone is a beneficiary of the NAI Shareholders, and, as of December 31, 2024, NAI beneficially owned, directly and through two wholly-owned subsidiaries, approximately 77.4% of our Class A Common Stock outstanding and approximately 9.5% of our Class A Common Stock and Class B Common Stock outstanding on a combined basis. NAI is controlled by the General Trust, which owns 80% of the voting interest of NAI. NA Administration, LLC is the corporate trustee of the General Trust, and is governed by a seven-member board of directors, which acts by majority vote (subject to certain exceptions), including with respect to the NAI shares held by the General Trust. Ms. Redstone is the Chairperson, CEO and President of NAI, is one of the seven directors of NA Administration, LLC and one of two directors who are beneficiaries of the General Trust. Ms. Redstone also has a minority indirect beneficial interest in the Class A Common Stock and the Class B Common Stock owned by NAI (and its wholly-owned subsidiaries). Further, in connection with the NAI Transaction, (i) the NAI Shareholders, (ii) certain directors and officers of NAI, including Ms. Redstone in her capacity as Chairperson, CEO and President of NAI (such individuals, the "NAI D&O Indemnitees") and (iii) NAI and NAI Entertainment Holdings LLC ("NAIEH") entered into an indemnification and contribution agreement, which terminated and superseded certain existing indemnification arrangements among the parties thereto and provided the NAI Shareholders and the NAI D&O Indemnitees with certain indemnification rights relating to the Transactions and the NAI Transaction from NAI and NAIEH capped at a maximum of $200 million. Affiliates of the NAI Equity Investors have guaranteed the payment and performance of the foregoing indemnification obligations of NAI and NAIEH, subject to the limitations set forth in the indemnification and contribution agreement. The foregoing indemnification obligations of NAI and NAIEH continue for ten years following the date of execution of the indemnification and contribution agreement, subject to extension for active claims thereunder and automatic termination upon the occurrence of certain triggering events set forth in the indemnification and contribution agreement, including the termination of the NAI Stock Purchase Agreement. The indemnification arrangements that were in place prior to the signing of the NAI Stock Purchase Agreement and that were terminated and superseded by the indemnification and contribution agreement provided, among other things, for uncapped indemnification of the NAI D&O Indemnitees and the NAI Shareholders by NAI and NAIEH for losses incurred in connection with their status as the controller of NAI and, in the case of Ms. Redstone, Paramount, in any litigation relating to the Transactions or the NAI Transaction. Additionally, Ms. Redstone, the current non-executive Chair of our Board of Directors, is a beneficiary of the NAI Shareholders. As a beneficiary of the NAI Shareholders and an employee of NAI, Ms. Redstone has interests in the NAI Transaction, including the right to receive a portion of the proceeds from the NAI Transaction, and therefore Ms. Redstone's interests in the NAI Transaction may not be the same as the interests of our other stockholders. The members of the special committee of our Board of Directors (the "Special Committee") and our Board of Directors who recommended that Paramount stockholders entitled to vote adopt the Transaction Agreement and approve the Transactions were aware of and considered these interests to the extent such interests existed at the time, among other matters, during their respective deliberations on the merits of the Transactions, in negotiating, evaluating and approving the Transaction Agreement and the Transactions, and in making our Board of Director's recommendation that the Paramount stockholders entitled to vote adopt the Transaction Agreement and approve the Transactions.
Share Price & Shareholder Rights - Risk 7
The PIPE Transaction is subject to certain cutbacks in the event that stock elections exceed specified thresholds.Added
Following the consummation of the Transactions, a minimum of $1.5 billion of cash proceeds from the PIPE Transaction (prior to giving effect to the subscription discount) will remain at New Paramount after the payment of cash consideration to holders of our Common Stock that make cash elections (the "primary gross proceeds") as described herein; however, the primary gross proceeds may be greater than $1.5 billion to the extent holders of our Class A Common Stock elect stock consideration or holders of our Class B Common Stock make cash elections that do not, in the aggregate, exceed the Maximum Class B Cash Share Number. The Subscription Agreements (as defined in the Transaction Agreement) provide that the maximum additional primary gross proceeds in such situation will not be greater than $1.5 billion (or $3.0 billion in the aggregate), in each case prior to giving effect to the subscription discount, and thereafter the obligations of the subscribers to subscribe for New Paramount Class B Common Stock in the PIPE Transaction will be reduced on a pro rata basis. As a result, the aggregate amount of gross proceeds from the PIPE Transaction may decrease as a result of such cutback mechanisms.
Share Price & Shareholder Rights - Risk 8
Our existing stockholders will have a reduced ownership and economic interest in New Paramount after the Transactions.Added
After the completion of the Transactions, our stockholders will own a smaller percentage of New Paramount than they currently own of Paramount. Following closing of the New Paramount Merger, the transfer of all of the issued and outstanding equity interests in certain blocker entities held by such blocker entities to New Paramount in exchange for an allocation of 316,666,667 shares of New Paramount Class B Common Stock and the Skydance Merger (as defined below) (the "Closing"), it is anticipated that the PIPE Equity Investors will receive approximately 17% to 38% of the outstanding shares of New Paramount Class B Common Stock as a result of the PIPE Transaction, the Specified NAI Stockholders will hold 100% of the outstanding shares of New Paramount Class A Common Stock and approximately 3% of the outstanding shares of New Paramount Class B Common Stock, the members of Skydance will receive approximately 27% to 30% of the outstanding shares of New Paramount Class B Common Stock as a result of the Merger of Sparrow Merger Sub, LLC, a California limited liability company and wholly-owned, direct subsidiary of New Paramount (the "Skydance Merger"), with and into Skydance, with Skydance surviving the merger and becoming a wholly-owned subsidiary of New Paramount, and other stockholders will hold approximately 29% to 53% of the outstanding shares of New Paramount Class B Common Stock, in each case, depending on the cash and stock elections described elsewhere herein. Consequently, our stockholders will have a reduced ownership and economic interest in New Paramount as a combined company compared to their ownership of Paramount prior to the combination. Similarly, a change in the concentration of the ownership of New Paramount Class B Common Stock as a result of the Transactions could result in a reduction to the public float and trading volume in the New Paramount Class B Common Stock, which could adversely affect the trading price of shares of New Paramount Class B Common Stock.
In addition, following the Closing, the amended and restated certificate of incorporation of New Paramount will provide holders of shares of New Paramount Class A Common Stock with the option to convert each such share into 1.5 shares of New Paramount Class B Common Stock. Any exercise of this conversion right following the Closing will result in further dilution to the holders of New Paramount Class B Common Stock at the time of conversion.
Share Price & Shareholder Rights - Risk 9
Holders of our Class B Common Stock may not receive all merger consideration in the form they elect, and the form of merger consideration that they receive may have a lower value or different tax consequences than the form of merger consideration that they elect to receive.Added
Under the Transaction Agreement, the maximum amount of cash consideration that holders of our Class B Common Stock will be entitled to receive pursuant to the New Paramount Merger, is approximately $4.3 billion in the aggregate, and a maximum number of shares of our Class B Common Stock equal to 285,889,212 shares of New Paramount Class B Common Stock (the "Maximum Class B Cash Share Number") will be entitled to receive the Class B Cash Consideration. The cash consideration payable to holders of our Class B Common Stock in the New Paramount Merger will be subject to proration in the event that the number of cash elections made by such stockholders in the aggregate exceeds this limit. Accordingly, some of the merger consideration a holder of our Class B Common Stock receives may differ from the type of merger consideration selected by such holder and such difference may be significant. This may result in, among other things, tax consequences that differ from those that would have resulted if such holder of our Class B Common Stock had received solely the form of merger consideration elected.
If one of our stockholders makes a stock election in respect of their Class A Common Stock or Class B Common Stock and the market value of our Class B Common Stock falls between the time of the election and the time the merger consideration is actually received, the value of such stock consideration received may be less than the value of the cash consideration that such stockholder would have received under a cash election. Conversely, if one of our stockholders makes a cash election and the market value of our Class B Common Stock rises between the time of the election and the time the cash consideration is actually received, the value of such cash consideration received may be less than the value of the stock consideration that such stockholder would have received under a stock election.
Share Price & Shareholder Rights - Risk 10
The stock consideration exchange ratios are fixed and will not be adjusted for stock price changes. Because the market prices of our Class A Common Stock and Class B Common Stock have fluctuated and will continue to fluctuate, our stockholders cannot be sure of the value of the stock consideration they will receive, and such value may be lower than the value of our Common Stock on an earlier date.Added
Upon completion of the merger of Pluto Merger Sub II, Inc., a Delaware corporation and a wholly-owned, direct subsidiary of New Paramount ("Paramount Merger Sub II"), with and into New Paramount, with New Paramount surviving the merger, subject to the terms and conditions of the Transaction Agreement (the "New Paramount Merger"), (a) each issued and outstanding share of New Paramount Class A Common Stock (other than (i) any New Paramount Class A Common Stock or New Paramount Class B Common Stock (collectively, the "New Paramount Shares") that is held directly or indirectly by Skydance or any wholly-owned subsidiary of Skydance (collectively, the "New Paramount Merger Cancelled Shares") and (ii) shares of New Paramount Class A Common Stock held by NAI, its wholly-owned subsidiaries and any permitted subsidiary transferee thereof (collectively, the "Specified NAI Stockholders")) will be converted automatically into the right to receive, at the election of the holder of such share, the Class A Cash Consideration (i.e., an amount of cash, without interest, equal to $23.00) or the Class A Stock Consideration (i.e., 1.5333 shares of New Paramount Class B Common Stock), and (b) each issued and outstanding share of New Paramount Class B Common Stock (other than (i) any New Paramount Merger Cancelled Shares and (ii) shares of New Paramount Class B Common Stock held by a Specified Stockholder (as defined in the Transaction Agreement) or a PIPE Equity Investor) will be converted automatically into the right to receive, at the election of the holder of such share and subject to the proration mechanism described herein, the Class B Cash Consideration (i.e., an amount of cash, without interest, equal to $15.00) or the Class B Stock Consideration (i.e., one share of New Paramount Class B Common Stock).
The exchange ratios set forth above were negotiated based on prices prevailing at the time of entering into the Transaction Agreement; however, the market price of our Class A Common Stock and Class B Common Stock at the time of completion of the Transactions may vary significantly from the market price of our Class A Common Stock and Class B Common Stock on the date the Transaction Agreement was executed, the date of this Annual Report on Form 10-K and the date on which our stockholders make their election. Because the Class A Stock Consideration and the Class B Stock Consideration are payable in a fixed number of shares of New Paramount Class B Common Stock, the value of the Class A Stock Consideration and Class B Stock Consideration that our stockholders will receive upon completion of the Transactions may be higher or lower than the value of our Class A Common Stock and Class B Common Stock, respectively, on such earlier dates and the value of any such stock consideration received may be lower than the corresponding cash election amount. In addition, as discussed below, the cash consideration received by holders of our Class B Common Stock will be subject to proration.
Accordingly, our stockholders will not know or be able to calculate at the time they make their elections the market value of the Class A Stock Consideration or the Class B Stock Consideration they will receive upon completion of the Transactions.
In addition, because no trading market currently exists for the shares of New Paramount Class B Common Stock to be issued in connection with the Transactions, the market value of New Paramount Class B Common Stock is unknown. The market value of the New Paramount Class B Common Stock will in part depend on the market value of our Class B Common Stock immediately before the completion of the Transactions. While there is a trading market for our Common Stock, the market price of our Common Stock has fluctuated since the date of the announcement of the Transaction Agreement and will continue to fluctuate from the date of this Annual Report on Form 10-K until the date that the Transactions are completed, which could occur a considerable amount of time after the date of this Annual Report on Form 10-K and the date on which our stockholders make their election. The market value of our Class B Common Stock at the time of the consummation of the Transactions may vary significantly from its price on the date of the Transaction Agreement or the date of this Annual Report on Form 10-K and the date on which our stockholders make their election and may not be reflective of the market value of the New Paramount Class B Common Stock. Because the consideration described herein will not be adjusted to reflect any changes in the values of our Common Stock, the value of the merger consideration may be higher or lower than the value of our Common Stock on earlier dates. Therefore, until the consummation of the Transactions, the holders of our Common Stock will not know or be able to determine the value, on a fully diluted basis, of the New Paramount Class B Common Stock that they will receive pursuant to the Transaction Agreement. Our stockholders are urged to obtain then-current market quotations for our Common Stock when they make their elections.
Stock price changes may result from a variety of factors, including general business, market, industry and economic conditions, changes in our and Skydance's respective businesses, results of operations and prospects, market assessments of the likelihood that the Transactions will be completed, the timing of the Transactions, regulatory considerations and other risk factors set forth or incorporated by reference in this Annual Report on Form 10-K. Many of these factors are beyond our and Skydance's control.
Share Price & Shareholder Rights - Risk 11
The market price for shares of New Paramount Class B Common Stock following the completion of the Transactions may be affected by factors different from, or in addition to, those that have historically affected or currently affect the market price for shares of our Class A Common Stock and our Class B Common Stock.Added
Upon completion of the Transactions, certain holders of our Class A Common Stock and holders of our Class B Common Stock will become holders of New Paramount Class B Common Stock. As a result of the Transactions, the business, financial condition and results of operations of New Paramount will be affected by factors that are different from those currently affecting our business, financial condition or results of operations. Accordingly, the market price and performance of New Paramount Class B Common Stock is likely to be different from the market price and performance of our Class A Common Stock and our Class B Common Stock in the absence of the Transactions. Factors that caused a fluctuation in the market price of our Class B Common Stock may not cause the same or similar fluctuations in the market price for shares of New Paramount Class B Common Stock following completion of the Transactions. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, New Paramount Class B Common Stock, regardless of New Paramount's actual operating performance.
Share Price & Shareholder Rights - Risk 12
The Transactions may not be accretive and may cause dilution to the earnings per share of New Paramount, which may negatively affect the market price of the New Paramount Class B Common Stock.Added
The issuance of shares of New Paramount Class B Common Stock as part of the Transactions could have the effect of depressing the market price of the New Paramount Class B Common Stock. In addition, we (or New Paramount after the Transactions) could encounter other transaction-related costs or effects, such as the failure to realize all of the benefits anticipated in the Transactions which could cause dilution to New Paramount's earnings per share or decrease or delay the expected accretive effect of the Transactions and cause a decrease in the market price of the New Paramount Class B Common Stock. However, factors decreasing the market price of our Class A Common Stock and our Class B Common Stock may not cause the same or similar decreases in the market price of New Paramount Class B Common Stock. See "- The market price for shares of New Paramount Class B Common Stock following the completion of the Transactions may be affected by factors different from, or in addition to, those that have historically affected or currently affect the market price for shares of our Class A Common Stock and our Class B Common Stock."
Share Price & Shareholder Rights - Risk 13
We may waive one or more of the conditions to the Closing without re-obtaining stockholder approval.Added
We (upon the recommendation of the Special Committee) have the right to waive, in whole or in part, certain of the conditions to the Closing, to the extent permitted by applicable law. Any such waiver may not require re-obtaining the approval of our stockholders (which has already been obtained via the written consent adopting and approving the Transaction Agreement), in which case we will have the ability to complete the Transactions without seeking additional stockholder approval. Additionally, if a new stockholder approval were to be required for any such waiver, the approval of NAI and its wholly-owned subsidiaries, NAI Entertainment Holdings LLC and SPV-NAIEH LLC (the "NAI Company Stockholders") would be sufficient. Any determination as to whether to waive any condition to the Closing, whether stockholder approval would be re-obtained as a result of any such waiver will be made by us (upon the recommendation of the Special Committee) at the time of such waiver based on the facts and circumstances as they exist at that time, and any such waiver could have an adverse effect on New Paramount and our current stockholders.
Accounting & Financial Operations1 | 2.4%
Accounting & Financial Operations - Risk 1
Losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and content could have an adverse effect on our business, financial condition or results of operations.Debt & Financing1 | 2.4%
Debt & Financing - Risk 1
Failure to complete the Transactions could negatively impact our businesses or financial results and the stock price of our Common Stock.Added
Corporate Activity and Growth5 | 11.9%
Corporate Activity and Growth - Risk 1
The Transactions are subject to a number of conditions to the Closing and, if these conditions are not satisfied, the Transaction Agreement may be terminated in accordance with its terms and the Transactions may not be completed. In addition, the parties have the right to terminate the Transaction Agreement under certain circumstances, in which case the Transactions would not be completed.Added
Corporate Activity and Growth - Risk 2
We will be subject to business uncertainties and contractual restrictions under the Transaction Agreement while the Transactions are pending.Added
Uncertainty about the effect of the Transactions on employees, commercial partners, clients, customers, suppliers and vendors may have an adverse effect on our ongoing business operations and, consequently, have an adverse impact on the business operations of New Paramount. Parties with whom we have business relationships, including distributors, advertisers, talent and content providers, may be uncertain as to the future of such relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. These uncertainties may impair our ability to retain and motivate key personnel and could cause customers and others that deal with us to defer or decline entering into contracts with us or make other decisions concerning us. Certain of our media rights contracts, vendor or supplier contracts, leases and financing-related agreements contain change in control restrictions that may give rise to a right of termination or cancellation in connection with the Transactions. See "- Risks Relating to the Transactions - The Transactions may trigger change in control or other provisions in certain agreements, which may allow third parties to terminate or alter existing contracts or relationships with us." In addition, if our key employees depart because of uncertainty about their future roles and the potential complexities of the Transactions, our business could be adversely affected. Furthermore, the Transaction Agreement contains restrictions on our ability to undertake certain actions or business opportunities outside the ordinary course of business prior to the completion of the Transactions without the consent of the other party, which may adversely affect each company's ability to execute certain of its business strategies. As a result, we may be unable, during the pendency of the Transactions, without the consent of the other, to make certain acquisitions, capital expenditures and sales or divestitures of assets, to borrow money, to enter into certain new business arrangements or opportunities and to otherwise pursue these or other actions specified in the Transaction Agreement, even if such actions would prove beneficial to us on a standalone basis, or to New Paramount.
Corporate Activity and Growth - Risk 3
Combining the Company's and Skydance's businesses may be more difficult, time-consuming or costly than expected and the actual benefits of combining the Company's and Skydance's businesses may be less than expected, either or both of which may adversely affect New Paramount's future results.Added
The success of the Transactions will depend, to a large extent, on New Paramount's ability to integrate the Company's and Skydance's businesses in a manner that facilitates growth opportunities and achieves certain cost savings, operating synergies and revenue growth trends identified by each company without adversely affecting current revenues or investments in future growth. Such anticipated benefits may not be achieved if the Company's and Skydance's businesses are not successfully combined. Although the Company and Skydance expect that the Transactions will result in synergies and other benefits, even if New Paramount is able to integrate the two companies successfully, the anticipated benefits of the Transactions may not be realized fully or at all or may take longer to realize than expected.
The combination of two independent businesses is complex, costly and time-consuming and may divert significant management attention and resources towards integration planning at the expense of the Company's and Skydance's ordinary course business practices and operations. This process also may disrupt the Company's and Skydance's businesses. Paramount and Skydance have operated as independent businesses and will continue to operate as such until the completion of the Transactions. Upon completion of the Transactions, the management of New Paramount may face significant challenges in integrating the technologies, organizations, systems, procedures, policies and operations, as well as addressing the different business cultures at the Company and Skydance, managing the increased scale and scope of the combined business, identifying and eliminating duplicative programs, and retaining key personnel. Failure to meet the challenges involved in combining the businesses and to realize the anticipated benefits of the Transactions could adversely affect the business, financial condition or results of operations of New Paramount. The combination of the Company's and Skydance's businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships or strategic partnerships. The difficulties of combining the operations of the Company and Skydance may include, among others:
- the diversion of management attention to integration matters and/or litigation matters brought against the companies;- difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure and financial reporting and internal control systems;- challenges in conforming business cultures, standards, controls, procedures and accounting and other policies between the two companies;- difficulties in integrating employees and compensation structures, and attracting and retaining key personnel, including talent;- challenges in retaining existing, and obtaining new customers, viewers, suppliers, distributors, licensors, lessors, employees, business associates and others, including material content providers, writers, producers, directors, actors and other talent, and advertisers;- difficulties in achieving anticipated cost savings, synergies, business opportunities, financing plans and growth prospects from the combination;- difficulties in managing the expanded operations of a larger and more complex company;- challenges in continuing to develop valuable and widely-accepted content and technologies;- contingent liabilities that are larger than expected; and - potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Transactions.
Many of these factors are outside of the control of the Company and Skydance and/or will be outside the control of New Paramount, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially and adversely impact the business, financial condition or results of operations of New Paramount. In addition, even if the operations of the businesses of the Company and Skydance are integrated successfully, the full benefits of the Transactions may not be realized, including, among others, the anticipated synergies, cost savings or growth opportunities. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of the businesses of the Company and Skydance. All of these factors could cause dilution to the earnings per share of New Paramount, decrease or delay the projected benefits of the Transactions, and negatively impact the price of the New Paramount Class B Common Stock following the Transactions. As a result, no assurances can be provided that the combination of the Company and Skydance will result in the realization of the full benefits expected from the Transactions within the anticipated time frames or at all.
Corporate Activity and Growth - Risk 4
The Transactions may trigger change in control or other provisions in certain agreements, which may allow third parties to terminate or alter existing contracts or relationships with us.Added
We have contracts with customers, licensees, vendors, landlords, lenders, business partners and other third parties, which may require us to obtain consents from these other parties in connection with the Transactions. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which we currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with us in anticipation of the Transactions or with New Paramount following the Transactions. The pursuit of such rights may result in us or New Paramount suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements or losing rights that are material to their respective businesses.
Any such disruptions could adversely impact New Paramount's ability to achieve the anticipated benefits of the Transactions. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the Transactions or the termination of the Transaction Agreement.
Corporate Activity and Growth - Risk 5
Decisions to make investments in new businesses, products, services and technologies, and the evolution of our business strategy, could have an adverse effect on our business, financial condition or results of operations.Changed
To effectively respond to market and consumer changes, we have made, and expect to continue to make, changes to our business strategy that are subject to execution risk, and there can be no assurance they will produce anticipated benefits. As part of the evolution of our business strategy, we have invested in or otherwise implemented, and expect to continue to invest in or implement, new businesses, products, services, technologies and other strategic initiatives, including through mergers such as the Transactions, acquisitions, strategic partnerships and investments, as well as through restructurings, cost savings and other transformation initiatives, including workforce reductions. For example, we have implemented, and are continuing to explore, certain updates to our international business strategy, including an increased focus on broad-based content, alternatives to how we deliver or package our streaming offerings and our approach to licensing. These changes may involve significant risks and uncertainties, including: difficulty integrating acquired businesses; failure to realize anticipated benefits; unanticipated expenses and liabilities; potential disruption to our business and operations;diversion of management's attention; difficulty managing operations; the loss or inability to retain key employees and creative talent; unanticipated challenges to or loss of our relationship with new or existing users, audiences, advertisers, suppliers, distributors and licensors; legal and regulatory limitations; insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with new investments; and failure to successfully develop an acquired business or technology. Many of these factors are outside of our control, and because new investments are inherently risky, and the anticipated benefits or value of these investments may not materialize, there can be no assurance such investments and other strategic initiatives will not adversely affect our business, financial condition or results of operations.
Legal & Regulatory
Total Risks: 9/42 (21%)Above Sector Average
Regulation3 | 7.1%
Regulation - Risk 1
Failures to comply with or changes in U.S. or foreign laws or regulations could have an adverse effect on our business, financial condition or results of operations.Regulation - Risk 2
We are subject to complex, often inconsistent and potentially costly laws, regulations, industry standards and contractual obligations relating to privacy and data protection.Changed
We are subject to laws, regulations, industry standards and contractual obligations in the U.S. and in other countries relating to privacy and the collection, use, process, transfer, storage and security of personal data.
In the E.U., for example, we are subject to the European Union General Data Protection Regulation ("E.U. GDPR") and in the U.K., to the U.K. General Data Protection Regulation and Data Protection Act 2018 ("U.K. GDPR," and together with E.U. GDPR, "GDPR"), which mandate data protection compliance obligations and authorizes significant fines for noncompliance, requiring extensive compliance resources and efforts on our part. Further, several other jurisdictions where we do business have enacted, amended or are considering new data protection regulations that may impact our business activities. In the U.S., numerous states have passed comprehensive data privacy laws. These laws mandate a host of obligations for businesses regarding how they handle personal information and provide new and expansive rights to the residents of these states. As an example, beginning in 2023, California began to offer privacy rights in the employment and business-to-business context similar to the requirements of the GDPR. In addition, these laws may be modified, or there may be changes in how these laws are interpreted, and new laws may be enacted in the future, which could increase our costs of regulatory compliance or require us to change our business practices. For example, on October 23, 2024, the U.K. government introduced the draft Data (Use and Access) Bill, which proposes various amendments to the current U.K. data protection regime, including to bring the maximum fine threshold for infringement of certain requirements relating to direct marketing and the use of cookies (currently £500,000) in line with the U.K. GDPR threshold (i.e., the higher of £17.5 million or 4% of annual global turnover), and the introduction of new data sharing frameworks. Other data privacy laws, such as health data privacy laws, may also have an impact on our business, especially with regard to some of our digital advertising offerings to advertisers in the health and wellness industries.
We are also subject to laws and regulations in the U.S. and in other jurisdictions around the world that are intended specifically to protect the interests of children and the online safety and privacy of minors, such as, in the U.S., the federal Children's Online Privacy Protection Act and various evolving and newly enacted state laws, including comprehensive privacy laws and laws specifically directed to the protection of children online. Further, in the E.U. and the U.K., we are subject to the GDPR, as well as codes of conduct and rules relating to the design of digital products and services likely to be accessed by children, including the U.K.'s Age Appropriate Design Code and other guidance documents issued in France, Ireland, the Netherlands, Spain, Sweden and other jurisdictions. As a result, we have been required to limit some functionality on digital properties and may be limited relative to our abilities to leverage new media with respect to children's programming or services. Such regulations also restrict the types of advertising we are able to sell on these digital properties and how we perform measurement for advertising purposes and impose strict liability on us for certain of our actions, as well as certain actions of our advertisers and other third parties, which could affect advertising demand and pricing.
Although we strive to comply with privacy and data protection laws, regulations, industry standards and contractual obligations, these requirements are continuously evolving and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another and may conflict with one another or other legal obligations with which we must comply, which raises both costs of compliance and likelihood that we will fail to satisfy all of our legal requirements. Any actual or perceived noncompliance could result in regulatory investigations and enforcement, investigation and remediation costs, significant monetary fines, breaches of contractual obligations, private litigation or harm to our reputation and market position.
Regulation - Risk 3
We and Skydance must obtain certain regulatory approvals in order to complete the Transactions; if such approvals are not obtained or are obtained with conditions, the Transactions may be prevented or delayed or the anticipated benefits of the Transactions could be reduced.Added
The Closing is conditioned upon, among other things, the expiration or termination of the waiting period (and any extensions thereof) applicable to the Transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Lawrence Ellison, the Sumner M. Redstone National Amusements Part B General Trust (also known as NA Part B General Trust) (the "General Trust"), and Skydance filed HSR Act
Notification and Report Forms on July 19, 2024 with respect to the Transactions that will bring entities controlled by the Ellison family into collective control of NAI and us while merging Skydance into us. The waiting period under the HSR Act expired on August 19, 2024.
Completion of the Transactions and of the NAI Transaction is also conditioned upon:
1.Clearance or approval by antitrust authorities in Australia, Austria, Brazil, Canada, the E.U., Germany, Saudi Arabia, South Africa, South Korea and Turkey. As of the date of this Annual Report on Form 10-K, all such clearances, approvals and/or expiration of applicable waiting periods by antitrust authorities have been received;2.Clearance or approval by foreign investment authorities in Australia, Canada, Czech Republic, Germany, Italy, Romania, Spain and the U.K. As of the date of this Annual Report on Form 10-K, clearances by foreign investment authorities in Australia, Canada, Czech Republic, Germany, Italy, Romania and the U.K. have been received;3.The closure of a preliminary review or adoption of a no objection decision by the European Commission under the Foreign Subsidies Regulation (Regulation EU 2022/2560). As of the date of this Annual Report on Form 10-K, confirmation of the closure of such preliminary review has been received; and 4.Clearance or approval by the FCC and regulatory authorities with jurisdiction over media and communications operations in Chile, and required filings with regulatory and governmental authorities with jurisdiction over media and communications operations in the U.K. Applications seeking approval by the FCC under the Communications Act for the transfer of control of Paramount's television broadcast licenses that will occur as a result of the Transactions and the NAI Transaction have been submitted and are pending before the agency. Applications seeking approval under the Communications Act for transfer of control of the other FCC licenses and authorizations that will occur as a result of the Transactions and the NAI Transaction were submitted to the FCC shortly thereafter. In accordance with the FCC's rules, such applications require disclosure of any individual entity that will hold a direct or indirect voting interest in New Paramount of 5% or greater following the Closing. Additionally, the Communications Act generally restricts foreign individuals or entities from collectively owning more than 25% of Paramount's voting power or equity without approval from the FCC. As of the date of this Annual Report on Form 10-K, and as assessed consistent with methodologies prescribed in FCC rules, no foreign individual or entity holds a direct or indirect voting interest in Paramount of 5% or greater or is expected to hold a direct or indirect voting interest in New Paramount of 5% or greater upon the Closing. In addition, foreign ownership in New Paramount is expected to remain below 25% in the aggregate upon the Closing. Accordingly, the applications submitted to the FCC do not seek, and were not required to seek, approval from the FCC with respect to foreign ownership. The FCC's review of the Transactions could impact the Closing of the Transactions, as further described in the immediately following paragraph. As of the date of this Annual Report on Form 10-K, clearance by regulatory authorities with jurisdiction over media and communications operations in Chile have been received, and the information required to be filed with the relevant U.K. authorities as of such date has been submitted.
At any time before or after the Transactions are completed, any of the United States Department of Justice, the Federal Trade Commission, U.S. state attorneys general, the FCC, the other regulatory authorities noted above or private parties could take action under applicable antitrust laws, foreign investment laws or media and communications laws in opposition to the Transactions by, among other things, (i) seeking to enjoin completion of the Transactions; (ii) seeking to condition completion of the Transactions upon the divestiture of assets of Paramount, Skydance or their respective subsidiaries; or (iii) seeking to impose restrictions on New Paramount's post-transaction operations.
Any such requirements or restrictions sought by regulatory authorities could prevent or delay completion of the Transactions or negatively affect the results of operations and financial condition of New Paramount following completion of the Transactions or reduce the anticipated benefits of the Transactions, any of which could have an adverse effect on New Paramount's business and cash flows, financial condition and results of operations.
No assurance can be given that the required regulatory approvals will be obtained or that the required conditions to the Closing will be satisfied or waived, and, even if all such approvals are obtained and all such conditions are satisfied or waived, no assurance can be given as to the terms, conditions and timing of such approvals. See "- Risks Relating to the Transactions - Failure to complete the Transactions could negatively impact our businesses or financial results and the stock price of our Common Stock."
Litigation & Legal Liabilities2 | 4.8%
Litigation & Legal Liabilities - Risk 1
As of the date of this Annual Report on From 10-K, several lawsuits have been filed in connection with the Transactions and additional lawsuits may be filed in the future against us, Skydance, NAI, our and their respective affiliates and/or boards of directors and management and the Special Committee, challenging the Transactions. An adverse ruling in any such lawsuit could result in substantial costs and/or delay or prevent the completion of the Transactions.Added
Litigation & Legal Liabilities - Risk 2
Our liabilities related to discontinued operations and former businesses could adversely affect our business, financial condition or results of operations.We have both recognized and potential liabilities and costs related to discontinued operations and former businesses, certain of which are unrelated to our existing business, including leases, guarantees, environmental liabilities, liabilities related to the pensions and medical expenses of retirees, asbestos liabilities, contractual disputes and other pending and threatened litigation. There can be no assurance our accruals for these matters are sufficient to cover these liabilities, individually or in the aggregate, if and/or when they become due. Therefore, there can be no assurance these liabilities will not have an adverse effect on our business, financial condition or results of operations.
Taxation & Government Incentives3 | 7.1%
Taxation & Government Incentives - Risk 1
Changes and uncertainties with respect to taxes in the jurisdictions in which New Paramount will operate may have an adverse effect on New Paramount's business, financial condition or results of operations.Added
Taxation & Government Incentives - Risk 2
A new 1% U.S. federal excise tax could be imposed on us or New Paramount in connection with redemptions by us or New Paramount of our respective shares.Added
The Inflation Reduction Act of 2022 imposes a 1% excise tax on the fair market value of stock repurchased by "covered corporations" beginning in 2023 (the "Excise Tax"). The Excise Tax is imposed on the repurchasing corporation itself, not its stockholders from which the stock is repurchased. In general, publicly traded domestic corporations are "covered corporations." Because each of us and New Paramount is a Delaware corporation and its securities are or will be traded on Nasdaq, we believe that we are, and New Paramount will be, a "covered corporation" for this purpose. The amount of the Excise Tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the Excise Tax.
Any redemption or other repurchase that we or New Paramount make of our respective shares may be subject to the Excise Tax. Whether and to what extent we or New Paramount would be subject to the Excise Tax with respect to any such redemption or other repurchase would depend on a number of factors, including the nature and amount of any "PIPE" or other equity issuances within the same taxable year of the redemption or repurchase.
Taxation & Government Incentives - Risk 3
There may be tax consequences of the Transactions that may adversely affect holders of our Common Stock if the Transactions fail to qualify as a tax-deferred exchange pursuant to Section 351 of the Code for U.S. federal income tax purposes.Added
The exchange of our Common Stock for New Paramount Common Stock pursuant to the Transactions generally is expected to qualify as a tax-deferred exchange pursuant to Section 351 of the Code for U.S. federal income tax purposes. If such an exchange fails to qualify as a transaction described in Section 351 of the Code, then a U.S. Holder (as that term is defined in the section entitled "Material United States Federal Income Tax Consequences" in New Paramount's registration statement on Form S-4) would recognize gain in an amount equal to the excess (if any) of (i) the fair market value of the New Paramount Common Stock received over (ii) such U.S. Holder's adjusted tax basis in its Common Stock. Any such gain would be capital gain and generally would be long-term capital gain if the U.S. Holder's holding period for the Common Stock exceeded one year at the time of the Transactions.
Environmental / Social1 | 2.4%
Environmental / Social - Risk 1
Increasing scrutiny of, and evolving expectations for, sustainability initiatives could increase costs, harm our reputation or otherwise adversely impact our business, financial condition or results of operations.Added
Ability to Sell
Total Risks: 7/42 (17%)Above Sector Average
Competition1 | 2.4%
Competition - Risk 1
We operate in highly competitive and dynamic industries and our business, financial condition or results of operations could be adversely affected if we do not compete effectively.Demand1 | 2.4%
Demand - Risk 1
The unpredictable and constantly shifting nature of consumer behavior, as well as evolving technologies and distribution models, have affected, and could continue to adversely affect, our business, financial condition or results of operations.Sales & Marketing4 | 9.5%
Sales & Marketing - Risk 1
If our streaming business is unsuccessful, our business, financial condition or results of operations could be adversely affected.Sales & Marketing - Risk 2
Infringement of our content reduces revenue received from the distribution of our programming, films, interactive games and other entertainment content.Our success depends in part on our ability to maintain and monetize our intellectual property rights. We are fundamentally a content company and infringement of our content adversely affects the value of our content. Copyright infringement is particularly prevalent in many parts of the world that lack effective laws and technical protection measures similar to those in the U.S. and Europe or lack effective enforcement of such measures, or both. Such foreign copyright infringement can also create a supply of pirated content for major markets. The interpretation of copyright, trademark and other intellectual property laws as applied to our content, and our infringement-detection and enforcement efforts, remain in flux, and some methods of enforcement have encountered political or commercial opposition. The failure to appropriately enforce and/or the weakening of existing intellectual property laws could make it more difficult for us to adequately protect and monetize our intellectual property and thus negatively affect its value.
Copyright infringement is made easier by the wide availability of higher bandwidth and reduced storage costs, as well as tools that undermine encryption and other security features and enable infringers to disguise their identities online. We and our production and distribution partners operate various technology systems in connection with the production and distribution of our programming and films, and intentional or unintentional acts could result in unauthorized access to our content. The continuing proliferation of digital formats and technologies heightens this risk. Internet-connected televisions, set-top boxes and mobile devices are ubiquitous, and many can support illegal retransmission platforms, illicit video-on-demand or streaming services and preloaded hardware, providing more accessible, versatile and legitimate-looking environments for consuming unlicensed film and television content. Unauthorized access to our content could result in the premature release of films, television programs or other content as well as a reduction in demand for authorized content, which would likely have adverse effects on the value of the affected content and our ability to monetize it. The legal landscape continues to evolve with respect to the development and increased prevalence of certain new technologies, including AI Technologies. As a consequence, we face uncertainty with respect to our ability to protect our intellectual property from unauthorized use, misappropriation, and infringement utilizing such technologies, and an increased risk of being subjected to claims brought by third-party rights owners with respect thereto.
Copyright infringement reduces the revenue we are able to generate from the legitimate sale and distribution of our content, undermines lawful distribution channels, reduces the public's and some affiliate partners' perceived value of our content and inhibits our ability to recoup or profit from the costs incurred to create such content. We are actively engaged in enforcement and other activities to protect our intellectual property, and it is likely we will continue to expend resources in connection with these initiatives. Efforts to prevent the unauthorized reproduction, distribution and exhibition of our content may affect our profitability and may not be successful in preventing harm to our business.
Sales & Marketing - Risk 3
Under the terms of the Transaction Agreement, the go-shop period has expired and we are no longer permitted to pursue alternatives to the Transactions.Added
The Transaction Agreement contains provisions that restrict our ability to enter into alternative transactions. Under the Transaction Agreement, starting on the no-shop period start date, we became subject to "no-shop" provisions that prohibit us from, among other things, soliciting, initiating or knowingly facilitating or knowingly encouraging any proposal or offer that constitutes, or could reasonably be expected to constitute or lead to, any acquisition proposal from a third party. If such a proposal were made, we would not be able to engage in or participate in any discussions or negotiations with the party making the proposal and would have no ability to terminate the Transaction Agreement in favor of the proposal.
The restrictions imposed on us under the "no-shop" provisions in the Transaction Agreement may discourage a potential acquiror that might have had an interest in acquiring all or a significant part of Paramount from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share value than the currently proposed merger consideration.
If the Transaction Agreement is terminated and we decide to seek another business combination, we may not be able to negotiate or consummate transactions with another party on terms comparable to, or better than, the terms of the Transaction Agreement. In addition, we may be required to pay to Skydance the Termination Fee if such business combination is agreed to or consummated within 12 months after such termination of the Transaction Agreement, subject to certain conditions.
Sales & Marketing - Risk 4
Our advertising revenues have been and may continue to be adversely impacted by several factors, including changes in consumer behavior and advertising market conditions.Added
We generate substantial revenues from the sale of advertising, and a decline in advertising revenues has had, and could continue to have, an adverse effect on our business, financial condition or results of operations.
The evolution of consumer preferences toward streaming and other digital services, and the increasing number of entertainment choices available to consumers, have intensified audience fragmentation and reduced viewership through traditional linear distribution models, which has caused and may continue to cause ratings and viewership declines for our television networks. This evolution has also given rise to new ways of purchasing advertising, as well as a general shift in total advertising expenditures toward streaming and digital, some of which may not be as beneficial to us as traditional advertising models. In addition, an increase in the number of advertising-supported streaming offerings has intensified, and may continue to intensify, competition for viewers and advertising. There can be no assurance we can successfully navigate the evolving streaming and digital advertising market or that the advertising revenues we generate in that market will replace the declines in advertising revenues generated from our traditional linear business.
Our advertising business is sensitive to general macroeconomic conditions as well as the economic prospects and spending priorities of specific advertisers or industries. Our ability to generate advertising revenue is also dependent on demand for our content, the viewers in our targeted demographics, advertising rates, targeting capabilities, results observed by advertisers, the perceived effectiveness of our advertising offerings and alternative advertising options. Natural and other disasters, pandemics, acts of terrorism, political uncertainty or hostilities could also lead to a reduction in domestic and international advertising expenditures as a result of disrupted programming and services and economic uncertainty.
Major sports events, such as the Super Bowl and the NCAA Division I Men's Basketball Tournament, and state, congressional and presidential elections cycles, may cause our advertising revenues to vary substantially from year to year. Political advertising expenditures are impacted by the ability and willingness of candidates and political action campaigns to spend funds on advertising and the competitive nature of the elections affecting viewers in markets featuring our content.
Advertising sales are also largely dependent on audience measurement and could be negatively affected if measurement methodologies do not accurately reflect viewership levels. In addition, if advertising buyers require the use of specific television measurement solutions, our inability to reach or maintain agreements with the providers of such television measurement solutions may negatively impact our advertising revenues. The industry is currently transitioning to a multiplatform measurement environment in an effort to more completely measure viewership and advertising across linear, streaming and digital, but has not yet established a consistent methodology for such measurement. Currently, the primary measurement technique used in our television advertising sales does not fully measure viewership across streaming and digital platforms. We measure and monetize across our streaming services using census-based advertising-server data establishing the number of impressions served, combined with third-party data providing demographic composition estimates. Multiplatform campaign verification is still not measured by any one consistently applied method. While we expect innovation and standards around multiplatform measurement to benefit us as the advertising market continues to evolve, we are nevertheless partially dependent on third parties to deliver those solutions.
Our ability to generate advertising revenues can also be impacted, and in certain circumstances has already been impacted, by an increasing number of global laws and regulations that limit our ability to deliver to, target or measure audiences. See "- Risks Relating to Legal and Regulatory Matters - We are subject to complex, often inconsistent and potentially costly laws, regulations, industry standards and contractual obligations relating to privacy and data protection."
Brand / Reputation1 | 2.4%
Brand / Reputation - Risk 1
Damage to our reputation or brands could adversely affect our business, financial condition or results of operations.Changed
Production
Total Risks: 4/42 (10%)Above Sector Average
Employment / Personnel3 | 7.1%
Employment / Personnel - Risk 1
We and, following completion of the Transactions, New Paramount must continue to retain, motivate and recruit executives and other key employees, which may be difficult in light of uncertainty regarding the Transactions and failure to do so could negatively affect us and New Paramount.Added
Employment / Personnel - Risk 2
Labor disputes could disrupt our operations and adversely affect our business, financial condition or results of operations.We and our business partners engage the services of writers, directors, actors, musicians and other creative talent, production crew members, trade employees, professional athletes and others who are subject to collective bargaining agreements. Any labor dispute may disrupt our operations and cause production delays, which could increase our costs and have an adverse effect on our businesses, financial condition or results of operations. In 2023, for example, the WGA and SAG-AFTRA commenced industry-wide strikes following the expiration of their collective bargaining agreements with the Alliance of Motion Picture and Television Producers, which negotiates with the guilds on behalf of certain content producers. These strikes resulted in months-long shutdowns in television and film production, and while new three-year agreements were ultimately reached with the WGA and SAG-AFTRA (expiring in May and June 2026, respectively), upcoming and ongoing negotiations with other unions could lead to further work stoppages. In addition, the U.S. has in recent years experienced a surge in labor activity, including unionization and strikes. There can be no assurance we will be able to renew our collective bargaining agreements on favorable terms as they expire or without work stoppages.
Employment / Personnel - Risk 3
The inability to hire or retain key employees or secure creative talent could adversely affect our business, financial condition or results of operations.Our business depends on the continued efforts, abilities and expertise of our executives and other employees and the creative talent with whom we work. We compete for executives in highly specialized and evolving industries and our ability to attract, retain and engage such individuals may be impacted by our reputation; workplace culture; restructurings, cost savings and other transformation initiatives, including workforce reductions; the training, development, compensation and benefits we provide; our commitment to effectively managing executive succession; and our efforts with respect to inclusion and sustainability matters. We also employ or contract with entertainment personalities with loyal audiences and produce films and other content with highly regarded directors, producers, writers, actors and other creative talent in highly competitive markets. These individuals are important to attracting viewers and to the success of our content, and our ability to attract and retain them may also be impacted by our reputation, culture, inclusion and sustainability efforts. There can be no assurance these individuals will remain with us or will retain their current appeal, or that the costs associated with retaining them or new talent will be reasonable. If we fail to retain or attract new key employees or creative talent, our business, financial condition or results of operations could be adversely affected.
Costs1 | 2.4%
Costs - Risk 1
We have incurred, and along with New Paramount will incur, significant transaction and merger-related transition costs in connection with the Transactions.Added
Tech & Innovation
Total Risks: 1/42 (2%)Below Sector Average
Cyber Security1 | 2.4%
Cyber Security - Risk 1
Disruptions or failures of, or attacks on, our or our service providers' networks, information systems and other technologies could result in the disclosure of business or personal information, disruption of our businesses, damage to our brands and reputation, and legal exposure and financial losses.Macro & Political
Total Risks: 1/42 (2%)Below Sector Average
Economy & Political Environment1 | 2.4%
Economy & Political Environment - Risk 1
Economic and political conditions in the U.S. and around the world could have an adverse effect on our business, financial condition or results of operations.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.