Skydance Floods Market With 470 Million Warrants as Record Media Debt Rattles Investors

Ten days after closing the largest takeover in Hollywood history, the company now called Skydance is distributing nearly 470 million warrants to its own shareholders, a financial maneuver that underscores how much debt the newly combined entertainment giant is carrying — and how skeptical investors remain about its ability to manage it.

Skydance Corporation, the former Paramount Skydance that absorbed Warner Bros. Discovery on October 6, disclosed in a regulatory filing with the Securities and Exchange Commission that holders of its Class B common stock as of the October 5 record date would each receive one 10-year warrant per share, with issuance expected on or about October 13. The warrants let holders eventually buy additional shares at a price tied to the stock's average trading level just before the merger closed, with a floor of $12.00 and a cap of $16.02. They can be redeemed early if the stock trades at or above $30 for 20 of any 30 consecutive sessions — a target that looks distant for now.

Skydance's Class B shares closed Thursday at $7.26, according to Yahoo Finance, well below both the $12.00-a-share price at which sovereign-wealth and private-equity investors bought into the company's merger financing and the stock's 52-week high of $17.29. The company's market capitalization stood at roughly $36.6 billion, a fraction of the deal's reported $110 billion enterprise value.

A Deal Years in the Making

The warrant distribution is the latest chapter in a saga that began when Paramount, controlled by David Ellison's Skydance Media and RedBird Capital Partners, outbid Netflix for Warner Bros. Discovery after Netflix — which had separately agreed months earlier to buy WBD's studio and streaming operations — declined to match Paramount's richer offer. Paramount's board approved what it would eventually confirm, in its own announcement of the deal's completion, as a transaction financed with $47 billion of new Class B equity priced at $12.00 a share, led by the Ellison family, RedBird, Saudi Arabia's Public Investment Fund, Qatar Investment Authority and LionTree, alongside debt financing arranged by Bank of America, Citigroup and Apollo. Warner Bros. Discovery shareholders received $31.01666668 in cash for each share they held.

The combined entity, which the companies have named simply Skydance, reports nearly $70 billion in annual revenue and brings together CBS, HBO, CNN, Paramount+, HBO Max, Nickelodeon and MTV under one roof, along with two major film studios. "Today is a historic day, not just for Skydance but for our entire industry," Ellison said in the companies' announcement, with RedBird founder Gerry Cardinale calling it "a defining moment for the industry." Competition authorities in nearly 70 jurisdictions cleared the merger before it closed, according to the companies.

Nearly $90 Billion in Debt

What the closing announcement did not dwell on is the balance sheet the combined company now carries. According to reporting on Fitch Ratings' assessment published by the trade outlet TheDesk.net, Skydance's total debt load after the acquisition is roughly $87.5 billion, including $44.5 billion in new first-lien secured debt, $12.4 billion in second-lien secured debt and $12.8 billion in new Skydance notes, on top of Warner Bros. Discovery's remaining unsecured notes. Fitch pegged the company's leverage at 7.8 times earnings for fiscal 2026 — among the highest of any major U.S. media company — and downgraded Skydance's long-term issuer rating from BB+ to BB, keeping it solidly in junk territory, according to a report on the rating action. Fitch's own projections assume leverage falls to 6.2 times by fiscal 2027 and 4.5 times by fiscal 2028, contingent on the company realizing the bulk of more than $6 billion in promised cost savings. In its closing statement, Skydance set a formal net-leverage target of 3.0 times by the end of 2029 and said it expects to generate more than $10 billion in annual free cash flow by 2030.

Analysts have questioned whether those targets are achievable without further equity raises or asset sales, particularly given that linear television — the traditional cable and broadcast networks now bundled into Skydance — accounted for roughly half of the combined company's pro forma revenue but the overwhelming majority of its earnings before interest, taxes, depreciation and amortization, a business segment in structural decline across the industry.

Who Gets Hit

The warrant program itself is designed to soften the blow for existing shareholders, who stand to be diluted as the company works through its debt and could eventually need more capital. But the people most directly affected by the merger are Skydance's own employees. Executives have confirmed that a portion of the targeted $6 billion-plus in "synergies" will come from layoffs of overlapping staff, on top of roughly 2,000 positions Paramount eliminated during 2025 ahead of the Warner Bros. Discovery deal. Warner Bros.' production arm alone employs thousands of the combined company's workforce, much of it in roles that duplicate functions already performed at Paramount or CBS.

Writers were the one group to secure explicit, binding protections before the deal closed. The Writers Guild of America had sued in July to block the merger outright, arguing in its complaint that a combined company with fewer competitors would have both the incentive and the ability to suppress writers' pay and reduce the volume of work available. The Guild dropped that suit only after Paramount separately settled with a coalition of a dozen state attorneys general led by California's Rob Bonta, whose consent decree requires the combined company to release at least 30 theatrical films annually for its first two years, rising to 32 thereafter, and to invest $300 million a year in domestic production for five years.

In exchange for ending its own case, the Writers Guild secured a commitment barring layoffs of writers at CBS News Broadcast for five years, plus a $17.5 million payment to the union's health fund and reimbursement of its legal costs. The Guild was candid about why it stopped fighting in court.

"We continue to believe the merger will cause damage to writers and the industry at large," the Writers Guild said in its statement announcing the settlement, adding that pursuing a full antitrust trial without government backing would have cost the nonprofit organization millions of dollars it did not have.

The Guild said it would now push for broader structural rules separating streaming platforms from the studios that supply them, comparing the idea to the financial-interest and syndication rules that once limited how much programming television networks could own outright — a sign that, even with its lawsuit resolved, organized labor's unease about consolidation in the industry has not gone away.

What Happens Next

For now, the warrants trading alongside Skydance's common stock give investors a way to make a leveraged bet on the company's recovery without committing fresh capital, and give the company itself a cleaner balance-sheet structure than the rights offering it originally floated. But the underlying question — whether a nearly $70 billion-revenue media conglomerate carrying close to $90 billion in debt can grow its way out from under that burden while linear television continues to shrink — remains unanswered. Coverage of the closing noted that internal memos to staff at both companies warned of "difficult decisions" still to come, even as executives publicly framed the merger as a historic moment for the industry.

Company leadership, with Ellison as chairman and chief executive and former Mattel chief Ynon Kreiz running day-to-day integration as co-CEO, has set itself a multiyear runway to prove the bet was worth it. Trade reporting on the settlement with writers suggested the next flashpoints will arrive as Skydance begins folding Paramount+ and HBO Max into a single streaming service and starts making the staffing decisions that its promised synergies require — decisions that will test both the five-year protections writers negotiated and the patience of shareholders now holding warrants in a company still working out how to carry its debt.