Paramount (NASDAQ: PARA) is giving investors a Succession-worthy lesson about the pitfalls of unequal voting rights

Paramount Global (NASDAQ: PARA), formerly known as ViacomCBS, is a media and entertainment powerhouse famous for its iconic networks including MTV and a film studio behind blockbuster hits from Indiana Jones to Titanic. Lately, it’s been better known for its messy effort to get a rescue deal as its business struggles to adapt to the age of streaming dominated by Netflix (NASDAQ: NFLX), with the latest twists and turns enough to fill the pages of an entire season of Succession — the HBO series that was partially inspired by the company’s controlling family.  

The backstory goes back for decades, and the company’s former majority owner – Sumner Redstone – has been called “more toxic and dysfunctional” than the fictional media tycoon Logan Roy. His daughter, Shari Redstone, now controls the empire and is at the center of a storm pitting Hollywood against Wall Street that even had a hard knock for Warren Buffett, who admitted last week that investing in the company had been a big mistake.

At the heart of the drama and debate over two competing offers to buy the company is an expensive lesson for investors about Paramount’s dual share class structure. Redstone, through her National Amusements holding company, controls class A voting shares and gets to decide what happens. Holders of non-voting class B shares that account for most trading and nearly 90% of the company’s market capitalization, meanwhile, are mostly powerless when it comes to big management decisions.

Hollywood has seemed to prefer a bid from Skydance, a California-based production company founded by David Ellison —  the son of Oracle (NYSE: ORCL) billionaire Larry Ellison — that would prioritize Redstone with a premium of around $2 billion for her class A shares. A competing $26 billion bid from Sony Pictures (NYSE: SONY) and private-equity firm Apollo Global Management (NYSE: APO) has been favored by class B investors because it would keep them on equal financial footing with Redstone, even though they don’t have the votes to control what ultimately happens. 

Class A shares have tended to rise when it looks like the Skydance offer pulls ahead but then decline when Apollo and Sony seem to gain an edge. The reverse is true for the class B shares, and the coming weeks will surely see more gyrations as the company considers both offers. Paramount’s investor relations website says that there is “no difference between the two classes except for voting rights,” but that difference has made all the difference. Class A shares have risen 20% this year, while class B shares have declined 12%.

Dual class structures can have benefits and expand access to a broader group of shareholders, but unequal voting rights create a wedge between ownership and voting interests, according to the Council of Institutional Investors. Indeed, class B shareholders may be simply trusting Shari Redstone to act rationally and do the right thing for all shareholders, but as any Succession fan will know, a mogul at the helm of an expansive family-controlled dynasty may have much more on their mind. The unfolding drama is not just a cautionary but also a stark warning: voting rights aren’t just a minor detail, they can be the entire game.