With Skydance Media in an exclusive period to possibly finalize a deal to acquire Paramount Global and its controlling shareholder National Amusements (NAI), Wall Street analysts are discussing key open questions, such as the financing of a transaction and how it can be structured to satisfy shareholders beyond NAI boss Shari Redstone. But despite the unknowns, at least one analyst on Thursday upgraded his rating on Paramounts stock, which is trading at $12.30 a share.

Wolfe Researchs Peter Supino has changed his rating from underperform to peer perform, while dropping the use of a stock price target. While fundamentally, there remain real risks to Paramounts business in the form ofdeclining linear profitability and a direct-to-consumer segment that we expect to remain unprofitable over the next few years, the rising prospect of a sale of the company to an owner more likely to exploit Paramounts intrinsic value outweighs near-term financial concerns, he explained. Supino highlighted that Paramount shares gained 15 percent earlier this week, ahead of a decline to the tune of 8 percent on Thursday. That still leaves Paramounts stock down around 15 percent year-to-date, underperforming its diversified entertainment peers, the analyst noted. While concerns with the business fundamentals, namely the continued erosion of core linear profits, remain and are reflected in the trailing 12 months underperformance of -37.4 percent [as of Wednesday], the likelihood of consummating a beneficial deal for all shareholders looks more probable. He also argued that the downside of a deal not materializing implies a share price of around $11.90.

Based on his estimate for the valuation of Paramounts linear TV assets, Supino then explained the upside for the buyer ahead. The opportunity for the film/studio suggests a potential to delever (maybe at the expense of the linear asset?), leaving a pure-play studio, production, and licensing operation, he emphasized.

Supino also addressed one key investor question about a possible Skydance deal for NAI and Paramount, saying that he and his team felt that it would offer Shari Redstone an exit, but worried about alignment with shareholders. Now, he is more optimistic, adding that, we believe that Skydances management hasproposed to Redstone and the Paramount board tointegrate Skydance into Paramount in a manner beneficial to all shareholders.

MoffettNathanson analysts Robert Fishman and Michael Nathanson highlighted one thing that is clear following the news of the 30-day negotiation window. Paramount has real offers on the table that will continue to be evaluated in the weeks ahead, they noted in a report with the title Choosing A Dance Partner. The firm maintained its neutral rating with a $12 price target on Paramounts stock.

Outstanding questions remain over how exactly the Skydance deal could be structured given uncertainty over how non-voting Paramount shareholders would receive value in the merged entity, they emphasized before turning to some details mentioned in a Wall Street Journal report. While a tentative deal has been reached over Shari Redstones NAI ownership, which includes 77 percent voting stake in Paramount, a second deal allowing for the merger of Skydance and Paramounts studio a priority for Ellison is still being worked out and would need approval from the companys independent committee of directors.

They added: The board has a fiduciary responsibility to consider the value delivered to all shareholders, not just those with voting power. It is unclear what Ellisons intentions are for the rest of the company.

Laurent Yoon, analyst at Bernstein, in a Thursday report wrote, The race is on, but its an obstacle course, and also discussed the questions raised by the exclusive Paramount deal talks.

The exclusivity period is like an I will not cheat agreement between two parties and typically follows a period of evaluating other options, he explained. The market didnt react to the news. But when news broke that the other option was a $26 billion cash bid from Apollo over the weekend, the share price jumped. Excluding debt, the offer would imply a roughly 50 percent premium to equity before the move or $17 per share far from its highs but a generous premium for an asset facing structural decline.

Yoon suggested some investor disappointment in NAI and Paramount not focusing on a deal with that price tag. The board cited uncertain sources of funding for rejecting Apollos offer, but has Apollo ever backed away from a deal due to financing issues? Paramount couldve protected themselves from this unlikely event as well, with a penalty clause, the expert argued. Given that Paramounts board (which represents the controlling shareholders interest) has chosen Skydance, Apollos offer serves as the floor but not necessarily for Class B shareholders.

The latter are holders of non-voting Paramount shares. The Bernstein analyst then shared this take: Apollo just did a huge favor for the board again after their $11 billion offer setting the floor price, at least publicly, for the studios unit of Paramount. But we will know in due course whether the decision to prioritize the Skydance option first is a stroke of genius, creating value for the company and its various stakeholders, or a case study by business schools on imperfect corporate governance structures.

All in all, Yoon concluded: We maintain our underperform rating for Paramount at an $11 target price given the uncertainty of the Skydance-NAI transaction, for which we do not see an upside for Paramount Class B shareholders from the disclosed information to date. We will revisit when more information is available and/or Apollo offer is under consideration by the board.