In a surprising turn of events, shares of Paramount Global surged 13% on Friday as investors welcomed the news of discussions between Sony Pictures Entertainment and Apollo Global Management regarding their potential collaboration for Paramount. The beleaguered stock closed the day at $12.44, experiencing trading volumes that were more than double its norm. This surge propelled the shares to their highest point since February, providing fresh evidence that many investors are favoring the Apollo/Sony scenario due to perceived structural advantages.

However, it should be noted that although the talks between Sony and Apollo are underway, they have not officially joined the bidding arena just yet. Currently, Skydance Media, led by David Ellison and backed by RedBird Capital and other investors, holds an exclusive negotiating window with National Amusements, Paramount's controlling shareholder, which is expected to last for the next two weeks.

While Skydance's proposal to keep Paramount Pictures intact and Ellison's impressive track record have gained support from industry veterans, its deal is accompanied by some strings attached. National Amusements Inc., helmed by Shari Redstone, possesses 77% of Paramount's voting shares but only approximately 10% of its equity. This raises concerns that a deal involving NAI may dilute the stakes of other shareholders, leading to a less enthusiastic reception from Wall Street. However, negotiations are still ongoing, and the outcome remains uncertain.

Even though Apollo has made separate approaches for both Paramount Pictures as a standalone entity and Paramount Global as a whole, Redstone has not embraced either proposition. Rumors of a $26 billion price tag for the latter offer, which includes assuming Paramount's debt, prompted a previous surge in the company's stock. Presently, Paramount's market value stands at around $8.5 billion.

Chris Marangi, co-CIO of Value at Gabelli Funds, an asset management firm and the second-largest stakeholder in Paramount voting shares after NAI, believes the company could potentially be worth $30 per share. This valuation surpasses the anticipated Apollo-Sony offer, which ranges from $20 to $25 per share. Marangi, however, acknowledges the challenges ahead, particularly regarding how Skydance will integrate its business into Paramount in a way that benefits all shareholders and avoids potential litigation.

Sony has also explored other merger and acquisition options in the sector, according to Marangi, who highlights the potential synergy to be derived from a combination with Paramount.

Jim Lebenthal, chief equity strategist for Cerity Partners and a long-term Paramount investor, expressed his dissatisfaction with the performance of the shares, describing it as a "horror show." He further highlighted the unpredictability of Shari Redstone, noting that her father, Sumner Redstone, had previously sought to acquire Paramount Pictures and other key components of the former Viacom, making her a wildcard in the ultimate direction of a deal.

As negotiations continue and potential alliances take shape, the fate of Paramount Global hangs in the balance. Investors eagerly await further developments in this high-stakes industry maneuvering scenario.