Welcome to Dry Powder. I’m William D. Cohan.

Now that Shari Redstone has deposed Bob Bakish, is the table set for the David Ellison-RedBird-KKR bid to beat out Apollo’s all-cash offer for Paramount? In today’s issue, why long-suffering Paramount shareholder Mario Gabelli is tweeting about C.V.R.s (it’s not happening, Mario), some news emanating from Sunday’s negotiation with the Paramount special committee, a close look at RedBird’s red lines, and much more.

But first, a notable docket item from my partner Eriq Gardner…

• Cuomo’s comeback tour: Since resigning as New York governor in the summer of 2021, Andrew Cuomo has been pushing the courts to an extent rarely seen as he seeks background information around the sexual harassment allegations that precipitated his downfall. He’s investigated his accusers, of course, but also their families, friends, and support networks, as well as the New York Attorney General Office, and the state’s outside law firms.

  But Cuomo’s next target is the media. The Cuomo camp is in the process of issuing subpoenas to CBS and ABC, demanding they hand over their communications with his accusers, including the outtakes from interviews. The two TV networks have yet to appear in court to contest the subpoenas. Cuomo’s efforts may trigger a legal showdown over New York’s Shield Law, designed to safeguard journalists from being compelled to disclose materials obtained from confidential sources. Meanwhile, Charlotte Bennett, one of Cuomo’s accusers, is petitioning New York Magistrate Judge Sarah Cave to curb the scope of his discovery efforts.

  Cuomo’s scorched-earth tactics aren’t incidental. It’s no secret that he’s testing the waters for a New York City mayoral campaign next November—if, and only if, he says, the state and federal prosecutors currently investigating Mayor Eric Adams bring an indictment or otherwise turn up information that would force Adams to resign. Given Adams’ lousy approval ratings, Cuomo might be tempted to primary him—an unlikely scenario given the lasting damage it would do to the city’s Democratic coalition. Then again, Cuomo’s prickly self-regard knows no bounds.

Like many men his age, the 81-year-old Gabelli isn’t a social media native. Despite his fortune, or because of it, he has about 32,000 followers on X, with whom he infrequently engages. (He follows one person, a friend from Chincoteague Island, Virginia.) But Gabelli has taken to the tortured platform in recent days to signal his distress, and his intentions, as the final chapter of this saga unfolds. In particular, I’m getting the sense that he is sending some subtle messages to the two groups of Paramount suitors—David Ellison-RedBird Capital-KKR, and Apollo-Sony Pictures—and to Paramount’s special committee of the board of directors, charged with blessing a deal for the company. He may also be telegraphing his wishes to Redstone herself, who owns 77 percent of the Paramount voting stock and therefore can do pretty much whatever she wants.

Anyway, Gabelli recently noted on Twitter that he is a fiduciary for more than 650 S.M.A.s—separately managed accounts—that own the 5 million shares of Paramount’s voting stock, and another 150-plus accounts that own Paramount’s non-voting stock. In other words, he wants people to know he’s a player here, too. He also tweeted, perhaps enigmatically, the words “contingent value rights,” or C.V.R.s, and the definition of the term from Wikipedia.

Only six people “liked” the post and no one retweeted it. That’s probably because most people had no idea what he was talking about or why he would tweet about C.V.R.s. But I am old enough to have some idea.

Once upon a time, back in the 1990s, C.V.R.s were all the rage on Wall Street as a way to offer a value sweetener to shareholders involved in a takeover who, for whatever reason, believed they weren’t being treated fairly, or getting enough consideration, in the proposed deal. A C.V.R. offered them more value, potentially, if the company performed poorly under its new ownership. It’s a form of an option, effectively.

Sometimes the C.V.R.s, which were often publicly traded, became valuable; sometimes they expired worthless. In fact, in 1994, Sumner Redstone’s Viacom issued C.V.R.s to the Paramount shareholders when he acquired the company. (I worked on that deal when I was a banker at Lazard.) After the Viacom stock later traded down, the C.V.R.s became more valuable and were bought back by the company for $83 million. In that case, the C.V.R.s worked as designed.

In any event, they have long since gone out of fashion, like so many Wall Street fads, such as the recent infatuation with SPACs. Gabelli appears to be telegraphing to Paramount and its suitors that he doesn’t want to be grinfucked here—he and his S.M.A.s and other non-Class A shareholders, like John Rogers Jr., would be a bit less angry if they were issued a C.V.R.

It’s a charming, nostalgic thought, but it’s not going to happen, Mario, at least not according to what I’m hearing. And the tweet, itself, shows just how absurd the Paramount situation has become. As someone who spent some time in the writers room during the first season of Succession, I can tell you that this is beyond any fictional scenario that we could have imagined, and did imagine, for the Roy family.

Either way, Bakish is hardly the first C.E.O. to feel the wrath of Redstone. All three of his immediate predecessors—Philippe Dauman, Les, and Joe Ianniello (remember him and his $100 million payday?)—were also unceremoniously ousted. Bakish did himself no favors by failing to sell BET and Showtime—there was a $6 billion offer from Blackstone and Mark Greenberg, one of the founders of Epix, in March 2021 that Bakish never showed to the Paramount board—when he had the chance, or by going in whole hog on the money-losing streaming wars, or by aligning himself against Shari’s preference with the Ellison/RedBird deal. (Obviously, he was going to be exited if Ellison and RedBird won out; he may have had a tiny chance of sticking around under Apollo and Sony.) People around the deal thought he wanted to raise his own cash for a bid for Paramount—a quixotic, naive, and much worse idea than simply advocating for Apollo. (A spokesperson for Paramount has denied this.)

Nothing sums up his tenure better than Monday’s very short earnings call, which featured a canned note of appreciation from Shari, zero opportunity for the research analysts to ask questions—after all, who would have questions about all this?—and the theme from Mission: Impossible playing at the end. As my partner Matt Belloni tweeted, it’s all “a bit on the nose.”

As best as I can tell, the situation is looking increasingly precarious for Gabelli, Rogers, and the other non-Redstone Class A shareholders. As of Sunday, the Ellison/RedBird final offer has been lodged with the special committee—advised by Blair Effron at Centerview Partners and Faiza Saeed at Cravath—and some of its demands have been met. Whereas Shari was once going to receive somewhere between $2 billion and $2.5 billion for her controlling position in Paramount, I am told that she will now receive a number below $2 billion. What she is giving up, something on the order of $300 million or so, will be shared with the Class B shareholders of Paramount. (A person close to the action told me that the “deals aren’t connected”—that NAI has asked the special committee to decide whether it wants to “move forward” with Skydance based on what Skydance is offering “all shareholders” and that, should the committee and Skydance agree to terms, then Skydance “may seek to renegotiate” with NAI. If that happens, NAI will re-engage in discussions with Skydance.)

Along with the majority of RedBird and Ellison’s $3 billion cash infusion into Paramount, this newly extracted pound of flesh will be used to buy Class B stock at a premium of 30 percent or so to Paramount’s “normalized” trading price of around $11 a share. Shari is presumably hoping this is enough to win over the special committee and placate shareholders, although she has yet to sign off formally on this plan, I’m told. (A spokesperson for Shari’s banker, Byron Trott, did not respond to my request for comment.)

As I have previously reported, Shari has also agreed to roll over a portion of her payment from Ellison/RedBird into the recapitalized/deleveraged Paramount and put her faith in their PowerPoint presentation, which is promising a $30 to $40 share price, thanks to the new management team of David Ellison, Jeff Shell, Jeff Zucker, and probably George Cheeks, the likely lone survivor from the newly appointed Paramount triumvirate. Alas, it appears that among the Class A shareholders, only Shari will get a premium. Gabelli and Rogers Jr. will get nothing special and can either sell their stock, keep it and hope that Ellison/RedBird delivers, or, naturally, sue in Delaware court and hope for a legal miracle.

Why is a bone being thrown to the Class B shareholders and not the Class A? I couldn’t tell you, other than I know that the special committee’s remit is to look out for the Class B shareholders, as opposed to the Class A shareholders. And this sop to the Class B shareholders, it would seem, will allow the committee to sleep a little easier at night. Other aspects of the Ellison/RedBird deal remain unchanged: Paramount will still be buying Skydance Media, Ellison’s Hollywood production company, for $5 billion. Paramount will get a whole new group of executives and a revamped business plan that envisions some $3 billion in cost cuts and “synergies,” and presumably ideas about how to stem the losses at Paramount+ and increase the business Paramount does with the NFL. (Gerry Cardinale, the affable founder of RedBird Capital, knows his way around the NFL, having successfully negotiated Skydance’s deals with the league.)

Prior to the Sunday negotiation with the special committee, Gerry and Ellison signed off on higher “synergies” than they first thought were possible, underwriting more of Shell’s vision for the company. Under the Ellison-RedBird deal, Paramount Global will remain a publicly traded company, with two classes of stock, less debt, new leadership, and the potential to achieve three to four times its current valuation. It’s a long putt, of course, but there is some hope.

My sense is that a “go shop” provision is sleeves off the vest, and Ellison/RedBird might as well agree to it, along with asking for an appropriate break-up fee. If Apollo/Sony make their bid public at some point, the Paramount stock will trade up toward that all-cash offer and the special committee will have no choice but to consider it, “go shop” provision or not. But I suspect that the Ellison/Cardinale team has drawn the line on any increase in consideration beyond what they offered on Sunday.

All is still very much in flux, as Heraclitus once observed. Yes, Ellison/RedBird are closing in on a deal, after having acceded to some of the special committee’s demands. But if the special committee asks for more still, that could be a dealbreaker. My sense is that Ellison/RedBird is at their breaking point here, or better said, their point of indifference. They’ve got a big success in Skydance already. There are limits to risking that success, I’m sure. They have to buy NAI (and those fading movie theaters) and are willing—along with Larry Ellison—to put another $3 billion or so into Paramount, in part to reduce debt and in part to buy back some Class B shares. The only way Ellison/RedBird makes a return on all of that money—real cash out the door—is if Ellison, Shell, and Zucker can make good on their business plan (a future Dry Powder topic, to be sure) and get Paramount’s stock doubling or tripling. Otherwise, this could quickly become a quagmire.

Ellison and Cardinale are smart not to get into too much more deal heat. They know that Apollo is getting ready to show its cards. And that could quickly change the dynamics yet again of this long-running saga. I’ll have more about that topic, and all of this, on Sunday.