Skydance valuation: 'There's no way that this company is worth $111 billion,' media analyst explains

By media analyst Evan Shapiro's reading, the stock market valuing Skydance ( SKYD ) at $111 billion is the lazy way of evaluating the newly formed media giant .

The publicly traded shares represent "about 10% of the equity in Skydance, which means that the market is valuing the company at $111 billion," Shapiro told Yahoo Finance Senior Reporter Brooke DiPalma (video above). "That's the price that Ellison paid for Warner Bros. Discovery. That's just lazy, and it's incorrect."

Shapiro's estimate is far lower: His team put Skydance's net asset value at $29 billion, a figure he published in his Media War & Peace newsletter .

Skydance, formed last week when Paramount closed its $111 billion purchase of Warner Bros. Discovery, owns the Warner Bros. and Paramount movie studios, the HBO Max and Paramount+ streaming services, and TV networks including CBS, CNN, HBO, TNT, TBS, Nickelodeon, and MTV.

The problem, he said, is that Skydance is "a business whose primary cash flow is coming from fading businesses, linear cable." Shapiro added that the company can't negotiate deals for Warner Bros. and Paramount channels together and must keep the two studios separate.

Then there's the debt: Skydance started out with $81 billion of it, Shapiro said, after taking on $52 billion of new debt to help pay for Warner Bros. Discovery. Billionaire Larry Ellison and Oracle ( ORCL ), the company he co-founded, "are backstopping this company and are expected to provide additional financing should the company get into trouble," Shapiro said.

Oracle has nearly doubled its long-term debt to more than $160 billion over the past two years, Bloomberg recently reported .

"The Ellisons now owe more than the valuation of Disney, Fox, and Roku combined," Shapiro said. By his Skydance figure and Bloomberg's Oracle figure, the two companies owe more than $240 billion, versus the combined value of $236 billion for Disney ( DIS ), Fox ( FOXA ), and Roku ( ROKU ) as of Monday's close.

"So there's no way that this company is worth $111 billion," he said.

What about Wall Street analysts who say the studios' film and TV library alone could justify the price?

Shapiro's answer comes back to debt and why it can't be ignored: "Analysts on Wall Street are actually now articulating the Ellison risk."

The Oracle and Skydance debt "are now intertwined," he said, and the cost of borrowing against it is "substantially higher than it was."