(Bloomberg) — Paramount Global surged in New York trading Tuesday after Warren Buffett’s Berkshire Hathaway Inc. reported purchasing an 11% stake in the media company, becoming the largest holder of nonvoting shares.
Shares of Paramount rose 15% to close at $32.32 in New York, the biggest one-day gain since March 2020, when the company was known as ViacomCBS Inc.
Berkshire invested $2.61 billion for 68.9 million Class B shares of New York-based Paramount, according to a regulatory filing with the US Securities and Exchange Commission. The voting shares are controlled by National Amusements Inc., led by Shari Redstone, Paramount’s chairwoman.
Berkshire may be betting on Paramount as a potential acquisition target. Like other media companies, Paramount is pushing hard into streaming: It’s the owner of the Paramount+ and Pluto online TV services. But Bloomberg Intelligence analyst Geetha Ranganathan said the company’s best path may be to tie up with another company.
“Despite its streaming success, we expect Paramount to remain subscale, suggesting that it eventually will have to sell itself to a bigger media company or a deep-pocketed tech giant,” Ranganathan said in a note. The company’s “digestible size (enterprise value around $35 billion), streaming success and content-production capabilities that include a film studio make Paramount an attractive target.”
Berkshire also disclosed new stakes in banking companies Ally Financial Inc. and Citigroup Inc. Buffett’s assistant didn’t respond to a request for comment. Paramount also didn’t immediately respond.
The investment takes advantage of the media company’s deflated share price, according to Cathy Seifert, an analyst with CFRA Research. Through Monday’s close, Paramount was down 7.2% this year, less than the S&P 500’s 16% drop.
“Given the year-to-date weakness in the communication services space and the disruption in the streaming space, valuations have been compressed and may look more attractive,” Seifert wrote in an email.
Berkshire has increased its position in media and technology companies over the past several months. The company has invested in Activision Blizzard Inc., a video-game publisher that agreed to be acquired by Microsoft Corp., as well as HP Inc., a computer manufacturer.
The investment in Paramount “fits the profile,” Edward James analyst Jim Shanahan said in a phone interview.
(Updates shares, adds analysts’ comments starting in seventh paragraph.)
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