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This is why David Einhorn thinks Peloton could be worth five times what it is now

suimt — Fri, 25 Oct 2024 18:41:06 +0000

David Enhorn pitches Peloton at the Robin Hood Investors Conference.

Getty Images (L) | CNBC (R)

Greenlight Capital’s David Einhorn thinks Peloton could trade as high as $31.50 a share if the company slashes costs, which could double its current adjusted EBITDA projections, CNBC has learned.

That’s about five times the current price of its shares, which were trading around $6.20 midday on Friday.

In a pitch deck Einhorn presented at the Robin Hood Investors Conference on Wednesday, Einhorn pedaled on a Peloton bike as he explained the company’s many missteps over the years and the wide runway it has to turn its business around, according to a copy of the presentation obtained by CNBC.

If it can generate $450 million in EBITDA, about double its current projections, Peloton could trade between $7.50 and $31.50 a share, based on a benchmark study of comparable companies, said Einhorn.

Notably, Greenlight’s analysis doesn’t assume “any growth in subscription revenues from new customers or price increases or other new initiatives, such as activation fees from the growing used bike market and international expansion,” Einhorn said.

“Facing bankruptcy can force change,” he said during the pitch. “Peloton has started to right-size and cash burn has stopped. It refinanced its debt to push out maturities. And with a loyal customer base that pays $44 per month, it’s a valuable subscription business.”

Einhorn structured the presentation as if he was an instructor giving a workout class, occasionally shouting out investors in the room. The first page of the deck was titled “15 minute ‘Stock Pitch Ride'” and shows an image of Einhorn on a Peloton bike.

“Let’s start with some shoutouts,” Einhorn said at the beginning of the pitch, calling out a number of investors and sponsors, similar to the way a Peloton instructor would call out class attendees.

Each page of the deck shows a leaderboard of other apparent riders — including investor Bill Ackman and Robin Hood CEO Richard Buery — along with Einhorn’s speed, cadence and resistance, mimicking what users see while taking a Peloton bike class.

Greenlight and Peloton declined comment to CNBC.

Greenlight, which had a $6.8 million stake in the company as of June 30, conducted a benchmark study analyzing Peloton’s cost structure. The firm compared Peloton to three sets of peer companies: fitness businesses like Planet Fitness, consumer subscription companies like Chewy, and consumer online subscription businesses like Spotify and Netflix.

The study found that even though Peloton has already cut costs to curb its cash burn, it’s seeing “basically zero adjusted EBITDA versus the peer median of $406 million,” Einhorn stated in the pitch.

“For peers, over a third of gross profit flows through to EBITDA. Part of the problem is that Peloton spends too much on research and development,” said Einhorn. “Just as one example, Peloton spends about twice the R&D that Adidas spends … in dollar terms. And Adidas has 8 times more sales than Peloton and an order of magnitude more product lines.”

Peloton’s stock-based compensation expense of $305 million in fiscal 2024 is also double the peer median and comparable to far larger companies like Spotify and Netflix – which are 30 times and 140 times larger, respectively, Einhorn said.

At the heart of the thesis is Peloton’s high-margin subscription business, which generated $1.71 billion in revenue in fiscal 2024 with a gross margin of about 68%. If Peloton can make deep cost cuts, the company could generate far more free cash flow and EBITDA without needing to sell more bikes and treadmills, and without needing to grow its subscriber base.

Earlier this year, Peloton announced plans to lay off 15% of its staff, close retail showrooms, and adjust its international sales plans, among other cost savings initiatives. It expects those cuts could reduce annual run rate expenses by more than $200 million by the end of fiscal 2025.

In August, Peloton said it expects it can post adjusted EBITDA of between $200 million and $250 million in fiscal 2025. But Einhorn said if the company gets its cost structure more in line with the benchmark, “there should be $400 – $500 million of EBITDA from the current subscription revenue base.”

Companies that generate that range of EBITDA tend to trade at nine to 32 times that amount, implying a potential Peloton share price of between $7.50 on the low end and $31.50 on the high end, if it reaches $450 million in EBITDA, he said.

To get there, Einhorn said the company needs new management. In August, Peloton’s interim co-CEO Karen Boone said she believes the new top executive will be in place by the time the company next reports earnings, which are now scheduled for Thursday.

“The nice part of our thesis is that we don’t have to convince Peloton this is the right approach,” said Einhorn. “Peloton’s interim co-CEOs are telling the same story of a recurring, high-margin subscription revenue stream business. They have also implemented an initial cost-cutting plan, which still leaves plenty of room for the new CEO.”

He said the company continues to garner top reviews among consumers and fitness publications and has a rabidly loyal customer base. He added that even though fitness buffs are returning to the gym, home workouts are here to stay.

“Working out in the comfort of your own home is not a fad,” said Einhorn. “And a trend towards healthier lifestyles should all drive underlying subscriber growth over time.”

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'Joker: Folie a Deux' is this year's latest box-office flop. Here's what else has disappointed

suimt — Fri, 18 Oct 2024 14:15:54 +0000

Joaquin Phoenix stars as Arthur Fleck in “Joker: Folie a Deux.”

Warner Bros.

Warner Bros. took a big swing with “Joker: Folie a Deux.” It’s turned into a big whiff.

After the billion-dollar success of “Joker” in 2019 on a shoestring budget of just $55 million, the studio greenlit a sequel, offering director Todd Phillips a substantially larger budget of $200 million. As of Wednesday, the film has garnered just $53.8 million domestically, according to Comscore. Its global haul stands at $166 million as of Sunday with updates expected over the weekend.

Panned by critics and audiences, “Joker: Folie a Deux” is not expected to recoup much of its lofty production budget or the additional $100 million in estimated marketing and distribution costs by the end of its theatrical run.

And it’s not the only blockbuster-budgeted film to disappoint at the box office this year.

Other studios, including Warner Bros., Universal, Lionsgate and even Sony, have dropped hundreds of millions of dollars on franchise features and star-studded ensembles — only to see ticket sales sputter.

Of course, it’s not an unusual occurrence in the theatrical industry.

“A combination of hits and flops are a hallmark of every box office year,” said Paul Dergarabedian, senior media analyst at Comscore. “But, 2024, being subject to a variety of unique challenges to both film production and the release calendar, created an imperfect storm that led to a series of creative misfires and financial failures.”

Additionally, as Hollywood contends with a growing streaming market and a more fickle moviegoing public, these misfires could worry investors.

“Before the rise of streaming, assessing a film’s financial performance was seemingly clearer cut than it has become in recent years,” said Shawn Robbins, director of analytics for Fandango’s movie division.

Because of streaming, Hollywood has shortened the theatrical window, bringing movies to the home market much faster than before. This means that potential moviegoers, who might be on the fence about seeing a movie or seeing it quickly, have a shorter time to wait before they can view it from their couch on a streaming service to which they already subscribe. And if that movie has poor reviews, audiences have even less incentive to go out to cinemas.

“In turn, this shift in dynamics and business models might call into question what kind of box office-to-budget ratio constitutes a loss and what doesn’t,” Robbins noted. “Some numbers are easier to eyeball and identify as a financial misfire without much argument, to be sure. Others may be less obvious to discern in a constantly evolving global marketplace.”

For example, a straight-to-streaming movie with a budget of $200 million could be deemed a success for a studio, if it drums up enough views. Meanwhile, a $200 million film that goes to theaters and underperforms is often considered a failure. That’s especially true when considering studios are also spending on marketing and promotion costs, usually equal to half of the production budget, and sharing ticket proceeds with cinemas.

For companies such as Netflix, Apple or Amazon that have bigger cushions and stakeholders who are traditionally more comfortable with risk, big-budget films going straight to streaming may not faze investors. But for more traditional media companies, that have long traded off their successes at the box office, shareholders still want to see a big theatrical return on investment.

Here’s a look at some of the biggest box-office disappointments so far in 2024, based on production budgets estimated by IMDb and box-office tallies to date from Comscore:

“Joker: Folie a Deux”

Estimated production budget: $200 million
Global box office: $166 million
Release date: Oct. 4, 2024

Warner Bros.’ “Joker: Folie a Deux” fell short of opening weekend expectations earlier this month, securing just $37.6 million domestically after initial box office forecasts called for close to $70 million in its first few days in theaters.

The film picks up after Arthur Fleck’s arrest in “Joker” as he awaits trial at Arkham State Hospital. Audiences failed to connect with the sequel, which featured Lady Gaga, who played a version of Harley Quinn, and her musical talents in a number of scenes.

“Joker: Folie a Deux” suffered the biggest second-week drop of any DC studios film, a whopping 81% fall.

For comparison, its predecessor snapped up $96.2 million during its opening weekend and $248.4 million globally in its first three days.

“Joker: Folie a Deux” failed to lure back its most ardent fans or inspire new moviegoers to flock to cinemas. Critics widely panned the flick, which currently holds a 33% rating on review aggregator Rotten Tomatoes and a rare “D” on CinemaScore.

“Borderlands”

Estimated production budget: $115 million
Global box office: $32.9 million
Release date: Aug. 9, 2024

Trying to capitalize on the popularity of video game-based movies, Lionsgate shelled out $115 million for director Eli Roth’s adaptation of “Borderlands.”

The film touted an all-star cast of Cate Blanchett, Kevin Hart, Jack Black, Jamie Lee Curtis and up-and-comer Ariana Greenblatt, but fell flat with audiences. Blanchett portrayed an infamous bounty hunter who forms an unlikely alliance with a ragtag team of misfits while on a quest to find the missing daughter of the most powerful man in the universe.

“Borderlands” generated a 10% rating on Rotten Tomatoes from 161 reviews and stalled out with just $32.9 million in global ticket sales.

Still from Lionsgate’s “Borderlands.”

Lionsgate

“Argylle”

Estimated production budget: $200 million
Global box office: $96.2 million
Release date: Feb. 2, 2024

Universal’s “Argylle” similarly had a stacked cast — Bryce Dallas Howard, Sam Rockwell, Henry Cavill, John Cena, Dua Lipa and Samuel L. Jackson, among them — but failed to drum up box-office interest.

The film centers on Howard as reclusive author Elly Conway, whose best-selling espionage novels start to mirror the covert actions of a real-life spy organization.

After spending around $200 million on production and an estimated $100 million on marketing efforts, the film generated just $96.2 million worldwide.

Much of the film’s issues stemmed from poor reviews — it garnered a 33% rating on Rotten Tomatoes — for what some called a convoluted yet predictable plot.

“The Fall Guy”

Estimated production budget: $125 million
Global box office: $180.9 million
Release date: May 3, 2024

Universal’s “The Fall Guy” was actually very well-received by critics, earning an 81% rating on Rotten Tomatoes. However, even the dynamic duo of Ryan Gosling, fresh off “Barbie,” and Emily Blunt, one of the stars of “Oppenheimer,” wasn’t enough to draw audiences out to cinemas.

The film, a love letter to stunt performers based on a television show from the ’80s with the same name, centers on Gosling’s Colt Seavers, a battle-scarred stuntman who is drawn back into the movie industry after the star of a film directed by Seavers’ former love interest Jody Moreno (Blunt) goes missing.

“The Fall Guy” tallied just $180.9 million globally. Its production budget was $125 million, not including marketing and distribution costs. The lack of major franchise attachment and niche storyline appears to have narrowed the audience.

Ryan Gosling stars in Universal’s “The Fall Guy.”

Universal

“Madame Web”

Estimated production budget: $80 million
Global box office: $100 million
Release date: Feb. 14, 2024

Sony’s Spider-Man universe films have been hit-or-miss at the box office for years. For every Venom or Spider-Verse success there’s a “Morbius” or a “Madame Web.”

With an 11% score on Rotten Tomatoes, “Madame Web” sparked the wrong kind of viral attention after its release. Memes flooded social media sites poking fun at the cast’s wooden performances, gaping plot holes and poorly redubbed dialogue.

“Madame Web” follows Cassandra Webb, a New York City paramedic with clairvoyance. Webb’s visions warn her about a threat to three young women, who each will gain spider powers in the future.

The film, which cost around $80 million to produce, managed to scoop up around $100 million in ticket sales globally. However, after marketing costs and splitting receipts with cinemas, the film did not make back its budget.

“Furiosa: A Mad Max Saga”

Estimated production budget: $168 million
Global box office: $172.4 million
Release date: May 24, 2024

Warner Bros.’ “Furiosa: A Mad Max Saga” was a long-awaited prequel from the mind of George Miller. However, despite solid reviews — a 90% “Fresh” rating on Rotten Tomatoes — the film failed to explode at the box office.

A prequel to 2015’s “Mad Max: Fury Road,” the film explores Furiosa’s early life after she is kidnapped by a tyrannical warlord and attempts over several years to get back home.

The film’s production did benefit from extensive government subsidies for filming in Australia, which lessened the financial blow, but “Furiosa” generated only $172.4 million during its global run. Its production budget was estimated at around $168 million without marketing expenses.

For comparison, “Mad Max: Fury Road” snared $368 million during its global run in 2015.

Chris Hemsworth stars as the villainous Dementus in Warner Bros.’ “Furiosa: A Mad Max Saga.”

Warner Bros. Discovery

“Megalopolis”

Estimated production budget: $120 million
Global box office: $9.2 million
Release date: Sept. 27, 2024

“Megalopolis” was a passion project for writer-director Francis Ford Coppola, who had been stewing over the film’s concept since the late ’70s. He self-financed the film, shelling out $120 million on production.

The film is set in an alternate version of 21st-century New York City called New Rome. It follows an architect named Cesar Catilina (Adam Driver) as he attempts to revitalize the city by building the futuristic utopia called Megalopolis all while facing corrupt leadership bent on shutting down his plans.

The “overstuffed opus,” as Rotten Tomatoes critics called the piece, had a sizeable cast of heavyweights in addition to Driver — Dustin Hoffman, Giancarlo Esposito, Laurence Fishburne and Jon Voight among them — but seemed to draw in only Coppola’s biggest fans. “Megalopolis” tallied just $9.2 million globally.

The film was distributed by Lionsgate. It is unclear if the marketing and distribution costs were split between Coppola and Lionsgate or if the studio took on the financial burden.

“Horizon: An American Saga — Chapter 1”

Estimated production budget: $100 million
Global box office: $38.2 million
Release date: June 28, 2024

Another passion project, “Horizon: An American Saga — Chapter 1” from Kevin Costner faced difficulties at the box office. The feature collected only $38.2 million at the global box office during its run in theaters. Its poor performance led Costner and Warner Bros. to postpone the release of a planned sequel, “Chapter 2,” which had been set for about six weeks after the first hit theaters.

“Chapter 1” follows several different narratives of people exploring the American West and pioneering new territory, including a gruff cowboy played by Costner, who finds himself on the run with a prostitute and a young boy after killing a fellow gunman.

Costner produced, wrote, directed and starred in both films, spending an estimated $100 million on the two projects. Two more chapters in the saga are still in development with an undisclosed budget.

Western films are a tough sell at modern box offices. The classic genre is beloved by film buffs, but isn’t a huge draw for moviegoers. The highest-grossing Western at the box office is Quentin Tarantino’s 2012 film “Django Unchained,” which generated about $450 million globally, according to Comscore. Costner’s “Dances with Wolves,” from 1990, is the second-highest with $424.2 million in global ticket sales, not adjusted for inflation.

While 2013’s “The Lone Ranger” tallied $260 million worldwide, no other Western film has garnered more than $250 million at the global box office.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Fandango and Rotten Tomatoes.

Jeff Shell is about to lead Paramount. He may have runway to make bold changes he couldn't at NBC

suimt — Fri, 11 Oct 2024 13:00:42 +0000

Jeff Shell, CEO of NBCUniversal, speaks during a conference at the Cannes Lions International Festival of Creativity in Cannes, France, June 22, 2022.

Eric Gaillard | Reuters

Less than two years after NBCUniversal fired Jeff Shell for alleged sexual harassment, the former CEO is close to finding himself back in the saddle leading a storied media company.

The longtime media executive is primed to help run the day-to-day media operations of Paramount Global as president of the company when its merger with Skydance Media closes in the first half of 2025, assuming regulatory approval. He’ll report to current Skydance CEO David Ellison, who will take the top job as the combined company’s CEO.

While neither Shell nor Ellison has publicly declared specific intentions for Paramount Global due to regulations banning “gun-jumping” in pending mergers, Shell’s recent tenure as the CEO of Comcast’s NBCUniversal, the parent company of CNBC, offers clues to what may be in store for Paramount.

CNBC spoke with a dozen people who worked closely with Shell during his tenure as CEO from 2019 to 2023. They described Shell as a person with big ideas and a willingness to make bold moves but with a style that depends on those around him to talk him out of decisions that may not make sense. Some of Shell’s boldest ideas — such as giving NBC’s 10 p.m. hour over to affiliates, merging with a rival, and turning CNBC primetime into a Fox News facsimile — never played out.

Comcast CEO Brian Roberts chose Shell to replace Steve Burke as NBCUniversal CEO in 2019. Shell had consistent success running a variety of different divisions within Comcast and NBCUniversal, including NBCU International and Universal Filmed Entertainment Group.

Colleagues told CNBC they found Shell to be a good listener and a collaborative decision-maker with a predilection for sometimes saying too much. His departure from NBCUniversal was sudden. In April 2023, a Comcast investigation corroborated allegations from a former CNBC reporter of sexual harassment. Shell joined private equity firm RedBird Capital Partners in February. RedBird backed the Skydance-Paramount merger and will assume a minority equity stake.

Soon, Shell, 59, will be at the helm of Paramount and paired with Ellison, who has already expressed his desire to transition Paramount into a more modern media company. That may set up a dynamic where Paramount’s CEO and president both want bold change.

welcome gaining the hour as a way to boost advertising revenue.

During a 2022 CNBC interview, Shell confirmed a Wall Street Journal report that he was considering ceding the hour to local affiliates to shift resources from linear broadcast TV toward streaming.

“If we’re being prudent operators, which we try to be, if you’re allocating a bunch of resources to one side of the business, you have to look at the allocation of resources to another,” Shell told CNBC’s David Faber at the time. “We make a lot of money at 10 o’clock. We still have a lot of viewers at 10 o’clock. There’s no question throughout the day as linear declines, you’re going to have to make some tradeoffs, and we’ll be looking at that as our investors would want us to look at.”

The 10 p.m. hour on broadcast networks still serves as a time slot for scripted dramas — a genre that’s largely gone to streaming and, in turn, has seen ratings struggle on traditional TV. CBS’ 10 p.m. programming includes “NCIS: Origins,” “FBI: Most Wanted,” “Elsbeth,” and “Blue Bloods,” which is in its 14th season.

Paramount Global co-CEO George Cheeks, who runs CBS, told Deadline in late 2022 that he was “committed to 10 p.m. and continuing our ratings success in that time period.”

Shell ultimately backed off giving up 10 p.m. for NBC after weighing the potential fallout with Hollywood creatives and agents, according to people familiar with the matter. Such a move at NBCUniversal would risk ruining relationships with TV titans such as “Law & Order” creator Dick Wolf, whose shows have occupied the 10 p.m. hour on NBC for years and have created a deep library for NBCUniversal’s flagship streaming service, Peacock. Irritating Hollywood would have run counter to Shell’s strategy to increase Peacock’s content catalog, as NBCUniversal needed strong relationships to fuel the service with new programming.

Wolf’s shows were also significant moneymakers for NBCUniversal, according to a person familiar with the matter.

Jeff Shell, CEO of NBCUniversal, speaks to the media at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, July 7, 2021.

Kevin Dietsch | Getty Images News | Getty Images

Ceding the 10 p.m. hour would also have negatively affected the ratings of NBC’s storied late night show, “The Tonight Show.” CBS’ late night show, “The Late Show With Stephen Colbert,” is consistently the top-rated late night show, which could naturally give Shell pause on moving away from 10 p.m. once he’s overseeing Paramount assets.

Still, all of the late night shows are losing audience, and a downsizing has already begun across the genre. Shell may feel it’s finally time to pull the rip cord.

He is clearly aware that the status quo of linear TV needs to change.

“Obviously a big chunk of the company is in the linear world, and we know that linear is challenged and declining,” Shell said during the July conference call. “I think a lot of us in the business know, we have got to run these businesses in a different way as they decline. And so, we’ve spent a lot of the last few months really building a bottom-up plan, and our goal is to manage the businesses, particularly the linear businesses, for cash flow generation.”

previously said.

That doesn’t appear to be in Ellison and Shell’s playbook for Paramount. The two have expressed their desire to partner Paramount+ with another streamer to add scale and content to the service, either through a merger or a bundle. Paramount Global has already held talks with a number of media companies about partnering on streaming, including NBCUniversal and Warner Bros. Discovery.

“To be a winner in [streaming] really means being in the ultimate bundle that’s coming,” Shell said during the July conference call. “We’ve had a bunch of inbound calls from a number of people about partnerships that could involve a partnership with another player or players.”

At NBCUniversal, according to people familiar with his thinking, Shell privately pushed the benefits of merging with another content company — again, something that never happened.

He spoke up in meetings about the benefits of merging with Viacom, WarnerMedia and even Netflix to ensure Peacock would have staying power against larger streaming services, according to people who heard him speak.

Ultimately, Comcast CEO Brian Roberts decided the moves weren’t in the best interest of shareholders or that it was too difficult to gain regulatory approval for them, though Roberts nearly approved a deal in 2022 for NBCUniversal to merge with video game developer Electronic Arts — a deal that, according to people familiar with the matter, would have seen Shell lose his job as NBCUniversal CEO. That role would have gone to EA CEO Andrew Wilson, the people said.

Jeff Shell, Chairman of Universal Filmed Entertainment Group, and Brian L. Roberts, Chairman and CEO of Comcast Corporation, seen at Universal Pictures “Sing” after party at the 2016 Toronto International Film Festival on Sunday, Sept. 11, 2016, in Toronto.

Eric Charbonneau | Invision for Universal Pictures | AP

hit Bravo franchises such as “The Real Housewives” and “Below Deck,” it has kept RSNs and news networks MSNBC and CNBC separate.

One of Shell’s big decisions at Paramount will be what to do with a handful of cable channels that have effectively turned into zombie networks, largely airing reruns of the same shows to avoid spending on new content. This includes MTV, VH1 and Comedy Central.

Shell wanted to combine some NBCUniversal cable networks to cut costs and push back on dwindling revenue, people familiar with the matter said, but ultimately decided not to.

Shell also had ideas that didn’t come to fruition about changing programming on some of NBC’s cable networks. He initially wanted CNBC to adopt what he described to others as a center-right primetime lineup, according to people familiar with the discussions at the time.

Then-CNBC chief Mark Hoffman argued the idea didn’t make sense for the network’s brand and likely wouldn’t have much of an audience, and Shell backed down, the people said. CNBC did hire former Fox News anchor Shepard Smith in 2020 to anchor a prime-time show that was canceled in 2022 just months after Hoffman retired. Hoffman declined to comment for this story.

One of Shell’s first accomplishments upon taking the NBCUniversal job was to renew the network’s “Sunday Night Football” deal with the NFL, and one of the last things he did was support NBC Sports moving forward with a bid for NBA rights if it got an opportunity, according to people familiar with the matter. NBC did get the chance to bid, and it’s bringing back NBA games beginning in 2025 after agreeing to pay about $2.45 billion per season to the league.

Both Shell and Ellison touted the importance of CBS Sports during their July conference call. When Paramount laid off hundreds of employees in September, none of them were part of CBS Sports, according to a person familiar with the matter.

CBS owns a Sunday afternoon package of NFL games, part of NCAA March Madness, Big Ten football, UEFA Champions League, and The Masters, among other sports. It wouldn’t be surprising if Shell migrates away from CBS entertainment programming toward sports, even in prime time, if those opportunities present themselves.

Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.

WATCH: Skydance has to prove over time it can change the future trajectory of Paramount

EchoStar nears deal to sell Dish to DirecTV with $2 billion debt payment looming, sources say

suimt — Fri, 27 Sep 2024 21:40:49 +0000

Charlie Ergen, chairman and co-founder of Dish Network Corp.

Jonathan Alcorn | Bloomberg | Getty Images

Charlie Ergen is getting close to selling the pay-TV business he founded more than 40 years ago.

EchoStar is in advanced talks to sell satellite TV provider Dish Network to rival DirecTV, the closely held pay TV operator owned by private-equity firm TPG and AT&T, according to people familiar with the matter. While the sides hope to complete a deal by Monday, no deal is assured, and the talks may still fall apart, said the people, who asked not to be named because the discussions are private.

The combination of Dish and DirecTV has been rumored for years and nearly happened in 2002 until it collapsed under regulatory pressure. This time, the deal is being driven by EchoStar’s desire to pay off $1.98 billion of debt that matures in November, said two of the people familiar with the process. EchoStar had just $521 million in cash and cash equivalents and marketable investment securities as of June 30 and forecast negative cash flows for the remainder of 2024, according to public filings.

The prospect of a future EchoStar bankruptcy and deal approval from creditors make the completion of a deal complicated. Dish attempted to refinance some of its debt earlier this week with bondholders, but the negotiations failed, according to a Sept. 23 filing.

The company said in public filings it remains in discussions with other debtholders.

A potential DirecTV-Dish transaction is being structured as all cash, with DirecTV paying EchoStar for the satellite TV business, its digital business Sling and associated liabilities, said people familiar with the matter. All in, the transaction may be worth more than $9 billion, according to one of the people.

A spokesperson for DirecTV declined to comment. A spokesperson for Dish couldn’t immediately be reached for comment.

“The bottom line is that we now see bankruptcy in the next four to six months as the most likely outcome [for EchoStar],” MoffettNathanson’s Craig Moffett said in a note to clients in August. “They will need to raise new capital.”

EchoStar has a total enterprise value of about $31 billion and a market capitalization of about $7.6 billion. There is no wireless spectrum involved in the proposed deal, which Dish Network has spent the past decade accumulating in its quest to transition into a wireless company, the people said.

Satellite TV, once some of the biggest distributors of the TV bundle, has been declining for years — often at a faster rate than cable competitors — as consumers switch to subscription streaming services such as Netflix, Disney+ and Amazon Prime Video. Dish ended its last quarter with 6.1 million satellite subscribers and 2 million customers for Sling TV, Dish’s over-the-internet package of linear networks.

DirecTV has also felt the pain, losing millions of subscribers since AT&T bought the company in 2015 for $67 billion with debt. AT&T spun it out in 2021 and sold a portion of the company to TPG. At that time, DirecTV had approximately 15.4 million subscribers. It has about 11 million today, CNBC previously reported.

The company has recently been focused on building out its streaming business, centering its latest ad campaign around dispelling the belief that DirecTV is only available through a satellite dish. MoffettNathanson estimates DirecTV added more than 20,000 streaming customers earlier this year. The bulk of its customers still use satellite dishes.

Most recently, DirecTV was in a distribution fight with Disney, which saw networks including ESPN go dark for nearly two weeks for the satellite TV company’s customers. The two companies reached a deal that gives DirecTV the ability to offer skinnier, genre-specific bundles.

— CNBC’s Lillian Rizzo contributed to this report.