Paramount Skydance Corporation (NASDAQ:PSKY) stock is falling on Friday due to escalating regulatory and legal barriers facing its proposed $110 billion merger with Warner Bros. Discovery (NASDAQ:WBD).
The stock is also experiencing sector-wide pressure after Netflix Inc (NASDAQ:NFLX) issued disappointing growth guidance.
Merger Facing Lawsuit Involving White House
A new shareholder lawsuit filed by Paul Robbins alleges that Paramount Skydance CEO David Ellison and his father Larry Ellison promised "illegal private benefits" to President Donald Trump in "order to remove federal regulatory barriers," according to Variety.
The lawsuit, filed on Thursday, claims that a side deal allowed the Ellisons to "improperly funnel cash" to the president to settle legal claims and promised the termination of certain CNN anchors after the acquisition.
Paramount Defends Merger Fundamentals
Paramount Skydance responded to the legal action, stating, "This lawsuit recycles allegations that have already been reported and already addressed."
According to a report by Variety, the company added, "As we’ve said consistently: no commitments from either David or Larry Ellison have been made to any government body, State AG, or federal agency regarding the future of CNN or any other news property, other than the goal to deliver truth-based journalism." The company stated it remains confident in the merger.
Sector Pressure From Netflix Guidance
The media sector faced additional headwinds on Friday after Netflix reported mixed second-quarter financial results and lighter third-quarter revenue guidance.
Rosenblatt analyst Barton Crockett maintained a Neutral rating on Netflix, noting the streaming company did not provide a "great explanation" for its slowing third-quarter revenue growth.
Netflix stock fell 8.8% to $67.82 on Friday morning, hitting new 52-week lows and dragging down peer media companies.
Technical Analysis
From a trend perspective, PSKY remains technically heavy: it’s trading 7.8% below its 20-day SMA, 12.1% below its 50-day SMA, 13.9% below its 100-day SMA, and 27.4% below its 200-day SMA. With the 20-day SMA below the 50-day SMA and the 50-day SMA below the 200-day SMA, the chart is still stacked bearishly across timeframes.
The current price is also hovering not far above the 52-week low at $8.62, which can act like a "line in the sand" for dip-buyers but also a trigger area if it breaks. On the upside, the first technical repair job is reclaiming the short-term moving averages, starting with the 20-day area near $9.66.
- Key Resistance: $9.66
- Key Support: $8.62
Price Action: Netflix shares were down 7.02% at $69.13, and Paramount Skydance shares were down 2.46% at $8.91 at the time of publication on Friday, according to Benzinga Pro data.
Image via Shutterstock
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