Skydance Corporation (SKYD.N): Bigger Move Than Warranted

SKYD traded ex-warrant today with a surprise in the adjustment factor resulting in what we think is a bigger decline in the ex-warrant shares than deserving, with -$11bn of market cap coming out despite just ~$1bn of value transfer from the warrant (~471mn x $2.20). Given just ~9% or ~471mn shares of the ~5bn total shares were entitled to receive the warrant (a 10-year call option on SKYD with a $12 strike), the pro-rata adjustment factor for the stock was just -$0.20 vs market participants broadly assuming closer to -$2.20. That said, the 'package' of stock (SKYD $7.06) plus warrant (SKYD/WS $2.50) was $9.56 vs yesterday's close of $9.27. Reasons for the bigger move than warranted include vol arb investors buying the warrants and shorting the stock, plus bearish fundamental investors waiting to short after the warrant went ex. We continue to hold an out of consensus bullish view on the pro-forma entity, with the stock now trading at ~7x fully synergized EV/EBITDA (from ~7.5x prior). W