Welcome to Dry Powder. I’m Bill Cohan. Happy Memorial Day from the Hudson Valley. I hope that all is well in Easthampton, Sconset, Aspen, etcetera.

Is David Zaslav’s current predicament—the NBA auction kerfuffle, WBD’s deteriorating stock price, etcetera—really as bad as it looks? In today’s issue, a survey of Zaz’s imagined internal monologue.

But first…

• The Nvidia shorts dig in…: Nvidia, the rocket-ship A.I.-chip company with a market valuation these days of $2.6 trillion, has seen its stock soar 121 percent in 2024—and 260,000 percent since its inception as a public company, in January 1999. In other words, investors love this stock, and probably for good reasons: it’s growing like a weed, given the apparent insatiable demand for its chips.

  But there are a lot of other investors who think it’s wildly overvalued. “Built into the price of Nvidia is the expectation the company will find another market as big as A.I., and achieve similar dominance,” Scott Galloway noted in his latest No Mercy/No Malice newsletter. That ain’t happening, of course. Scott’s conclusion about the Nvidia bubble is “when will it pop?” and “who will endure?” Who knows? But I checked in with another friend, Bob Sloan, the founder of S3 Partners, the premier data analytics company, to confirm what I suspected: that Nvidia is the number one equity short in terms of dollar/notional exposure worldwide. According to S3, Nvidia short interest is currently 29.2 million shares, or 1.2 percent of the float, with a $27.6 billion notional value. (Microsoft is the second-most-shorted stock at the moment, with perennial short Tesla at number three.)

  But shorting Nvidia in 2024 has been the biggest loser for shorts by a “significant margin,” Bob told me. The year-to-date losses have been some $15 billion. Although this is not investment advice, I suspect at some point the Nvidia shorts will be right, just not yet apparently.

• The Perelman art sale: Longtime readers will know that I am fascinated by the financier Ron Perelman, who was once the richest man in America. According to Bloomberg, Perelman was worth around $18 billion in 2018. Since then, his beloved Revlon has filed for bankruptcy, giving control of the company to its creditors, and other Perelman companies have fallen on hard times. Perelman has recently sold jets, yachts, mansions, and his once astounding art collection, as my partner Eriq Gardner has brilliantly reported. Back when I was a banker, I used to marvel at Perelman’s collection when I would visit his office townhouse on East 62nd Street to pitch him acquisition ideas. Anyway, Perelman may fancy a “simpler life,” as he once told me, but one also assumes that creditors must be repaid, too.

  Recently unsealed court documents in Perelman’s long-running legal battle with various insurance companies illustrate the significance of the art fire sale. (Tragically, and ironically, the legal dispute pertains to an actual fire at his Hamptons estate that he argues damaged various artworks—and for which he is trying to collect insurance money.) Between 2020 and 2022, Perelman sold 71 works of art for some $963 million and then repaid his creditors $910 million of that sum. The works he sold comprised some of the best pieces by artists including Brice Marden, Cy Twombly, Constantin Brâncusi, Ed Ruscha, Egon Schiele, Gerhard Richter, Roy Lichtenstein, and Mark Rothko.

I know it may be crazy, but at the moment, I think David Zaslav, as unpopular as he has become in various circles—pissing off Hollywood creatives with his cash-optimizing slash-and-burn moves, infuriating Charles Barkley with his NBA auction strategy, or annoying Wall Street with his company’s deteriorating stock price—is acting like a lifeguard. Zaz is trying to survive by working together with the other swimmers.

Taking into account my understanding of the market and my chats with people who inhabit these choppy waters, I think Zaz’s current predicament is not as bad as it looks—and certainly not as bad as Barkley has portrayed it. First of all, the NBA viewership peaks during the two-month playoff run in the spring—i.e., right now—which isn’t ideal for streamers. If WBD ends up losing the NBA, Zaz & Co. will have other options to preserve the value of TNT as an advertising business and within the cable bundle. But the company may have to bid aggressively for UFC and other sports rights, like the package of College Football Playoff games it just licensed from ESPN. Those games may be viewed in up to 25 million homes, or around three times as many as the NBA Finals, which WBD doesn’t broadcast anyway.

In addition to the CFP games, and sharing March Madness with CBS, Zaz also has half of the MLB postseason, half of the Stanley Cup Playoffs, and NASCAR for the summer, which also has better ratings than the NBA. WBD will also broadcast the Paris Summer Olympics in most European territories. (Although, obviously, NBC has the exclusive on the Games in the United States.) Anyway, all will not be lost, even if Zaz loses the NBA.

WBD could also contemplate something more creative, such as turning Inside the NBA into a competitor to First Take or Get Up or PTI. Barkley may look for an out in his contract if WBD loses the NBA, but he might also be persuaded to pivot the program to a studio chat show model—which isn’t all that dissimilar from what he tried to do with Gayle King on CNN, before the show was canceled—and earn out his handsome 10-year deal.

I’m sure Zaz would rather have the NBA and keep Barkley happily ensconced with Ernie Johnson, Shaq, and Kenny Smith, and he still might be able to do that, even if he loses the B package to Comcast and NBC. I know that he really wants to take the C package from Amazon and believes that he can pull it off. But I also know he won’t be foolish about overbidding for it, or for the B package, and that he might even relish the fact that Brian Roberts is paying $2.6 billion a year for the latter.

Meanwhile, and this really is the key thing: Zaz and the WBD board remain hellbent on their strategy of servicing the debt and waiting for the market to appreciate the effort. Zaz still has $39 billion of net debt hanging around his neck. Yes, it’s down from $55 billion when he closed the WarnerMedia deal in April 2022, but he’ll have to pay down even more of it before his equity value will move up. And Zaz and Gunnar Wiedenfels, his trusty sidekick, are getting rewarded by the WBD board to keep paying the debt down, even if that means deep-sixing Batgirl or continually cutting costs at CNN. As a Welch disciple, he’s comfortable—sometimes too comfortable—making ruthless business decisions.

And while the NBA’s prospects look incredibly bright as a new generation of marketable stars takes over, an 11-year deal is and eternity in this rapidly shifting environment, and chances are in a year or two—especially in the wake of the Paramount sale process, if it ever gets resolved—the Big Media landscape could look very different than it does now. Indeed, Zaz is very interested in both CBS and Paramount+, and they may factor in his longer-term strategy, as may having the dry powder to buy them if and when they become available.

Zaz can’t afford to be uneconomic on any deal he cuts at the moment, whether it be for sports rights or an acquisition. His debt is just too massive a burden. As Gus Levy, the former senior partner of Goldman Sachs used to say, “Something well bought is half-sold.” I also believe Zaz sees the future, increasingly, as a bundled world. Now that the Reverse Morris protocols are in the rearview, I get the sense that he is exploring his deal and partnership options. He’s looking for allies among his brethren for what he perceives as the long-term battle against Netflix, Amazon Prime, and YouTube. By bundling, he can save on content costs and on marketing costs. My guess is that he believes he’s better off finding ways to partner with Disney and Fox (and even Comcast, if Brian would be open to it) against Netflix, Amazon, and Google rather than going it alone, and finding that, in five years, the tech bros have left the media bros in the dust.

He already has the new sports bundle app he’s creating with Disney and Fox, having cut a deal with Bob Iger and Lachlan Murdoch that excludes Brian, which probably has added to the latter’s general angst and is motivating him to get a win with the NBA. Zaz has also cut the bundling deal with Iger for Disney+, Hulu, and Max, which offers a diverse set of content to 100 million Max subscribers and 150 million Disney+ and Hulu subscribers.

By the way, for those wondering what’s going on with the Hulu deal and why Bob and Brian haven’t reached an agreement yet, I’m told that Brian is holding out for more money and would be happy to wrap things up on the Hulu front as soon as possible, but of course these things always take longer than people think they will. Alas, not every company needs partners as much as WBD.