Skydance shareholders receive warrants as index selling threatens to pressure prices

what happened

Barron’s reports that public shareholders of Skydance will receive about 470 million warrants this week, with one warrant for each class B common share. The instruments are scheduled to begin trading Tuesday on the NYSE under the ticker SKYD WS, while the stock will trade ex-dividend on Wednesday. Options-pricing models suggest the warrants could be worth close to $3 each. They will mature in 10 years and carry an exercise price of $12 a share.

Skydance shares fell 1.6% to $9.02 on Monday and are down about 30% this year. The company was known as Paramount Skydance before acquiring Warner Bros. Discovery last week for more than $100 billion, including debt. S&P index funds are expected to sell 130 million or more warrants, representing over 25% of the total, because the instruments will not be included in the S&P 500.

The control shareholders, including the Ellison family and RedBird Capital, own about 90% of Skydance’s 5 billion shares outstanding and will not receive the warrants. The company believes the distribution will be tax-free for U.S. holders, but New York tax expert Robert Willens said it is likely to be taxable. The stock has been under pressure as investors assess the Warner transaction’s high debt, integration challenges and ambitious financial targets.

why it matters

The distribution creates a potential short-term technical effect in both securities: index-fund selling may weigh on SKYD WS, while the stock could theoretically fall by the warrant’s trading value after going ex-dividend. Barron’s notes that the market reaction will also depend on how investors assess the combined company and the Warner deal.

instruments