Money Stuff: Warner Doesn’t Trust Paramount

If you’re a normal person, most of your wealth is probably in your own name. But if you’re one of the richest people in the world, you probably have a lot more complicated estate and tax planning, which probably means that a lot of your wealth is in trusts, legal arrangements that your lawyers set up to hold assets for you. Most simply, you might have a revocable trust, where your assets technically belong to the trust but you have control over the trust’s assets, investment decisions, beneficiaries, etc. This can be useful for estate planning, but for most purposes owning assets in a revocable trust is pretty much like owning them yourself. I regularly say that Mark Zuckerberg owns a lot of shares of Meta Platforms Inc., or that Elon Musk owns a lot of shares of Tesla Inc., even though neither statement is exactly true. Their trusts own the shares. [1] But for most practical purposes you could think of, [2] they own them.

This creates, I suppose, a small dumb problem. Let’s say you build big yachts and Mark Zuckerberg comes to you and asks to buy a billion-dollar yacht. Naturally he will pay you the billion dollars on completion of the yacht. You might ask him: “Well, do you have a billion dollars?” And he might say “no, actually I don’t. But The Mark Zuckerberg Trust owns like a bajillion dollars’ worth of Meta stock, and I control that, so I’m good.” You find that persuasive, so you pull up the yacht sale contract and — who do you put in as the buyer? [3]  If you put “Mark Zuckerberg,” he has no money. If you put “The Mark Zuckerberg Trust,” it has plenty of money, now. But if it is a revocable trust, he can just take all the money (shares) out whenever he wants. It’s revocable! If he changes his mind about the yacht, he can clean out the trust. You’ll send the bill to the trust, but the trust will have no money, and you’ll be stuck with the yacht.

Honestly this is a pretty easy problem to solve. You put “Mark Zuckerberg” in the contract: He doesn’t own the assets directly, but he controls the trust, so if he owes you a billion dollars you can make him take it out of the trust. (“The revocable trust does not provide asset protection.”) But maybe you’ll get confused, or he’ll get confused, and you’ll end up signing a contract with the trust. And then if he changes his mind, he can zero out the trust and stiff you.

I cannot imagine that this comes up a lot, with yacht builders or anyone else. Elon Musk once did sign a contract to buy Twitter Inc. for $44 billion, and then changed his mind and tried to get out of it. The fact that his wealth is mostly in a trust did not, at any stage of those proceedings, trouble anyone: He had signed his equity commitment in his own name, and everyone understood that if he was sued and lost he’d have to pay, with his trust’s money if necessary. (And Twitter did sue him, and he did pay.) Fine fine fine.

On the other hand, Paramount Skydance Corp. is trying to buy Warner Bros. Discovery Inc., breaking up Warner’s deal to sell itself to Netflix Inc., and Paramount does not have nearly enough money to pay for Warner. Instead, much of the money behind the bid comes from Paramount’s chief executive officer’s dad, Larry Ellison, as of this writing the fifth-richest person in the world. Or rather it comes from his trust. And this would be one of the greatest tricks in the history of mergers and acquisitions:

One major sticking point is Warner Bros.’ concern about the financing proposed by Paramount, which is led by David Ellison.

A big part of the equity is backstopped by a trust that manages the wealth of his father, software billionaire Larry Ellison. Because it’s a revocable trust, assets can be taken out of it at any time and Warner Bros. may have no recourse if that happens, the people said.

Ahahaha sure. The risk here is:

• Warner throws over Netflix, pays it a $2.8 billion breakup fee, and signs a deal to sell itself to Paramount for something like $108.4 billion in cash. [4]
• For some reason — changing market conditions, regulatory difficulties, a change of heart by the Ellisons, or a change of heart by their co-investors — the Ellisons decide they don’t want to close the deal.
• Quietly, in the comfort of his own home, without saying anything to Warner, Larry Ellison takes all his stock out of the trust, leaving it empty. “Yoink,” he whispers to himself.
• “Oops, never mind,” Paramount tells Warner.
• Warner sues Paramount for “specific performance,” seeking to make it pay $108.4 billion and close the deal.
• “Lol we don’t have that kind of money,” says Paramount, which has a market capitalization of about $15 billion and about $3 billion in cash. “When we signed this deal, you knew that the money was coming from the Ellison trust.”
• So Warner sues the Ellison trust for specific performance, seeking to make it pay $108.4 billion ($40.7 billion of its own money, with the rest from its debt financing sources) and close the deal.
• “Lol we don’t have that kind of money,” says the Ellison trust. “We did, sure, but the trust got revoked.” “Yoink,” adds Larry Ellison, more loudly this time.
• So Warner sues Larry Ellison for the money.
• “Who, me?” says Larry Ellison. “You have no deal with me, I don’t even know what you’re talking about, this is not my problem.”

This does not strike me as especially likely, and it would obviously be bad for Paramount and the Ellisons, [5]  but I suppose it is possible, and it would be a pretty fun trick.

Today Warner officially rejected Paramount’s bid, advising shareholders not to sell their shares in Paramount’s tender offer. Here is how Warner describes Larry Ellison’s commitment or lack thereof:

Despite PSKY’s headline claims, there is no equity commitment or backstop from the Ellison family for the Offer (and there never has been). Neither Mr. L. Ellison nor Mr. D. Ellison has agreed to personally guarantee or is in any way obligated with respect to the Offer – despite the fact that access to an extraordinary amount of their personal wealth is essential to close the Offer. For months, PSKY assured the WBD Board that the Ellison family would fully backstop the equity financing required for a transaction with WBD.

This commitment has never materialized. …

PSKY’s proposed “Ellison family backstop” is actually a commitment from the Revocable Trust, an opaque entity whose assets, liabilities, beneficiaries, terms, conditions and limitations are not publicly disclosed, and are subject to change. … PSKY has provided no information with respect to the terms or governance of the Revocable Trust, nor other liabilities it may have. A revocable trust generally has terms that would pose substantial risks to WBD stockholders. It is typical, for example, that a grantor of a revocable trust can remove assets from the trust; the terms of the trust can be amended to permit, or prohibit, certain transactions; the trust can be dissolved and its assets fully distributed, leaving a shell entity; the trust may incur significant liabilities; and other beneficiaries of the trust may have claims against the trust if it takes certain actions not in their best interests. 

As far as I can tell, and somewhat bafflingly, this is correct: Paramount’s own tender offer (pages 33-34) says that the Ellison equity commitment and guarantee will be from The Lawrence Ellison Revocable Trust, not from Larry Ellison himself. The offer points out that the trust is rich — “The Ellison Trust has financial resources well in excess of what would be required to meet its financial obligations under the Equity Commitment Letter, including, among many other assets and financial resources available to it, record and beneficial ownership of approximately 1.16 billion shares of Oracle stock with a market value of approximately $252 billion as of the date of this Offer to Purchase” [6] — but, as the name says, it is revocable. 

This seems extremely fixable? Have Larry Ellison sign the commitments personally? William Cohan reports that the whole situation is “trains passing in the night,” and that “the Ellisons … believe they can still be sued for ‘specific performance’ to fund the deal”; he quotes a person familiar with their thinking saying that “there is no financing condition in the deal” and “Paramount and the Ellisons/RedBird, along with our lenders, are legally obligated to close regardless of future financial or business performance at Paramount.” That is not an impossible thought to convey in merger papers! And yet so far they apparently haven’t.

The weird state of environmental, social and governance investing in 2025 is:

1. Some clients want their investment managers to consider ESG criteria in making investments.
2. Other clients want their investment managers not to consider ESG criteria in making investments.

“This is easy,” you think, because you are a sensible person. “The managers should consider ESG in making investments for the first set of clients (the ESG ones), and should not consider ESG in making investments for the second set of clients (the anti-ESG ones). The managers pursue different goals for different clients all the time, there is nothing hard about this.” But no! The ESG clients want the managers to consider ESG in all of their mandates: They do not want their money to be invested in coal companies, and they do not want their money to be invested by people who also invest in coal companies. And the anti-ESG clients want their managers not to consider ESG in any of their mandates: They do not want their money to be withheld from coal companies, and they do not want their money to be managed by people who also withhold other people’s money from coal companies. I’m not saying this makes a ton of sense.

So the actual solution is something like “the managers have to consider ESG for the ESG clients, but keep it secret from the anti-ESG clients, and they have to ignore ESG for the anti-ESG clients, but keep that secret from the ESG clients.” Or, at least, they have to be very tactful about it. Bloomberg’s Frances Schwartzkopff and Leonard Kehnscherper report:

US money managers are working on private arrangements to stem a wave of defections by sustainability-focused clients in Europe’s €6 trillion ($7 trillion) pensions market. ... Workarounds include side letters, whereby tailored portfolio management terms are negotiated in private; or segregated accounts that allow asset managers to hold on to clients that might otherwise walk away, according to lawyers and investment managers interviewed by Bloomberg. ...

The need for discretion is growing in the current political context, with the administration of US President Donald Trump making it ever harder for American asset managers to openly pursue environmental, social and governance strategies. As a result, Wall Street has walked away from net zero alliances and ditched what had once been a public embrace of diversity, equity and inclusion policies.

In Europe, meanwhile, where asset owners face regulations to disclose ESG data, many continue to demand that the managers receiving their investment mandates allocate funds in ways that take account of ESG and DEI factors.

Against that backdrop, side letters are becoming a regular workaround, says Heike Schmitz, a Frankfurt-based partner and co-head of ESG EMEA at law firm HSF Kramer.

They’re a “very secret business,” says Schmitz, who advises both asset managers and institutional investors. The alternative, which is “to have it all in your fund documents, is now obviously a bit more challenging,” she said.

Oops now the secret is out! I’m kidding. I think? I assume everybody knows that something like this is going on; you’re just not supposed to talk about it too much.

The rough math of a SpaceX initial public offering is:

1. SpaceX wants to go public at a valuation of $1.5 trillion, give or take, which is really really big, near the largest valuation of any IPO ever.
2. It wants to sell $30 billion of stock in that IPO, give or take, which is really really big, the largest amount raised in any IPO ever.
3. But the raise is not thaaaat big, relative to the valuation. Tesla Inc., another Elon Musk-controlled company with a market capitalization of about $1.6 trillion, trades about $34 billion of stock a day. If you persuade the market that SpaceX is a $1.5 billion company, then finding people to buy $30 billion of its stock is not crazy.

Fine! The problem is not the $30 billion. The problem is the other $1.47 trillion. Right now, SpaceX is owned by a bunch of people — early investors, employees, Elon Musk — who are shareholders in a private company. SpaceX, like some other giant private companies, does periodic tender offers so that employees and other early investors can sell their stock, but that’s not quite the same as being a public company whose shares trade on the stock exchange. Many of SpaceX’s private shareholders — presumably not Musk, though who knows — would probably like to sell some of their stock once SpaceX is public and it’s easy to sell at market prices.

And if, you know, $500 billion of SpaceX stock comes loose in a day, that’s much harder for the market to digest than $30 billion. The Information reports:

Wall Street is gearing up for three potentially record-setting initial public offerings over the next 18 months. The talk among bankers is not about what SpaceX, Anthropic and OpenAI will do on their big days but about what happens after that, when the companies’ existing shareholders try to unload their multibillion-dollar stakes.

Each of the three has raised some of the largest amounts ever for private companies. That creates the risk that when they go public, early investors will flood the market with so much stock that it will depress prices. That’s always a danger for companies going public, which is why early investors are typically prevented from selling for three to six months. But the sheer amount of stock held by early investors in SpaceX, Anthropic and OpenAI heightens the risk for the tech giants.

Investment bankers are starting to prepare for that reality, discussing proposed solutions to help win deals, even before some of the official IPO work has begun. At least two large banks largely ruled out a standard IPO lockup period of either 90 to 180 days and are discussing how to design a staggered lockup release for companies like OpenAI and Anthropic, bankers said. …

One option is staggering the dates to prevent a wave of selling on one day. IPO bankers and lawyers said investors could be allowed to sell a portion of their holdings every 20 to 30 days. Releases can also be triggered when the stock hits a certain price, they said.

If you’re a shareholder of a trillion-dollar private company, you are used to getting limited periodic liquidity events where you can sell shares. Why should that change when the company goes public?

I guess if you like crypto there are three imaginable legal systems that might regulate your affairs:

1. Normal countries, with laws and legislatures and police and courts.
2. “Code is law,” where everything is trustless and decentralized and conduct is regulated by smart contracts rather than flawed human decisionmaking.
3. Some crypto guys get together and start their own country with their own laws.

I personally would not want to go to a country run by crypto laws! But that’s me. If you are a crypto guy, you might prefer crypto-guy laws to normal-country laws. You might even prefer them to code-is-law. “Those crypto guys really know how to run a country,” you might think. Not me! But maybe you. Anyway:

A wealthy bitcoin investor wants to set up his own court system within a libertarian community on a Caribbean island as part of the tech-backed “network state” movement.

Olivier Janssens’ company, South Nevis Ltd, is buying up land on Nevis for his proposed “Destiny” development — the first scheme of its kind on the island, which has been enabled by a new Nevisian law.

Speaking via video link to a panel of islanders in late November, Janssens criticised Nevis’s court system for lacking “efficiency . . . And if we’re just going to copy that, it’s not attractive to people to come.”

Instead, he said Destiny could “propose that for certain matters we have our own efficient court systems”, but would ultimately “still abide by” the national legal system.

Yeah, sure, terrific. In like three years I’m going to read a really good investigative report about the Destiny crypto jail.

The upside of working at a top investment bank is that you get to work on interesting headline-making deals and you get paid a lot of money. The downside is that you have to work a lot of nights, weekends and holidays. Or maybe that’s also an upside? Maybe you’d rather spend Thanksgiving negotiating a financing package than discussing politics with your uncle? I once asked: “What percentage of mergers and acquisitions do you think are driven by people trying to avoid spending time with their children?” Maybe working on holidays is a perk of high-level investment banking?

Here’s a Financial Times story about the advisers in the bidding war for Warner Bros., which kicked off around Thanksgiving and looks hot going into Christmas:

“I’ve missed Christmas Eve and New Year’s and the Fourth of July holidays for deals a lot smaller than this,” said Dwayne Safer, who worked for 10 years in investment banking at Stifel and is now an associate professor of finance at Messiah University. 

The auction process already claimed one holiday, with negotiations coming to a head on Thanksgiving weekend in late November. “When the NBA players play on Christmas Day, nobody says our holidays are ruined. They say isn’t it great you’re in the NBA,” said an adviser involved in the deal. “This is as good as it gets for investment bankers.”

I want to make fun of this attitude but honestly I was a mergers-and-acquisitions lawyer for a while and I get it.  You want to think that what you do is important, and one sign that it’s important is that you are on conference calls on Christmas. 

Oracle at Center of Tech’s $500 Billion AI-Fueled Rent Spree. OpenAI in Talks to Raise $10 Billion From Amazon, Use Its Chips. Inside Mark Zuckerberg’s turbulent bet on AI. The Squishy Number Behind the Rise and Fall of Oracle’s Stock. Oracle’s $10bn Michigan data centre in limbo after Blue Owl funding talks stall. Milei Stymies Wild Peso Swings as He Resets Argentine FX Policy. JPMorgan pulls $350bn from Federal Reserve to buy up Treasuries. Icahn Money Manager Sues His Bosses and Bausch + Lomb Over Anti-White Bias. Panama Ports Deal Hits Impasse as China Makes New Demands for Its Approval. Banking Watchdog Mulls Tighter SRT Disclosure Guidelines. Spooked by AI and Layoffs, White-Collar Workers See Their Security Slip Away. Palantir CEO Alex Karp Pays Record $120 Million for Colorado Monastery. Meet the High School Kids Cutting $25,000 Venture Checks in Silicon Valley.

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