National Amusements

National Amusements, Inc. (NAI) is a privately-held American media and entertainment holding company based in Massachusetts. While it operates a chain of movie theaters, its true significance for investors lies in its role as the controlling shareholder of the media giant Paramount Global. This is not a simple majority stake; NAI wields its power through a special class of stock that grants it approximately 80% of the voting rights in Paramount. This structure effectively gives the Redstone family, who own National Amusements, ultimate control over Paramount's strategic direction, including mergers, asset sales, and the appointment of its board of directors. For anyone investing in Paramount's publicly traded stock, understanding NAI is not just helpful—it's absolutely critical. You are not just investing in Paramount's assets; you are placing a bet on the decisions and priorities of its powerful, and often unpredictable, controlling family.

The secret to National Amusements' iron grip lies in a dual-class share structure. This is a common tool used by founders and families to retain control of a public company without owning a majority of its equity. In the case of Paramount Global, this plays out as follows:

• Class A Shares (Ticker: PARAA): These are the “super-voting” shares. Each one carries one vote. National Amusements owns the vast majority of these, giving it near-total control over shareholder votes.
• Class B Shares (Ticker: PARA): This is the class of stock most ordinary investors buy and sell. These shares represent an economic interest in the company but have no voting rights.

For a value investor, this is a glaring red flag in the area of corporate governance. While you may own a piece of Paramount's sprawling empire—including the Paramount Pictures film studio, the CBS television network, and streaming services—your ability to influence the company's direction is zero. You are a passenger, and the Redstone family, via National Amusements, is in the driver's seat.

Investing in a company controlled by NAI presents a classic dilemma. On one hand, the underlying assets of Paramount might appear significantly undervalued, a potential siren song for a value hunter. On the other hand, the presence of a dominant controlling shareholder often creates what's known as a “controlling shareholder discount,” where the market values the stock lower than it otherwise might.

The risk is that the interests of National Amusements may not align with the interests of minority shareholders (that’s you!). The controlling family might make decisions that benefit their private holding company, even at the expense of the public one. A perfect, recent example is the high-stakes drama surrounding the potential sale of Paramount Global. Various suitors, from private equity firm Apollo Global Management to Sony Pictures, expressed interest. However, the ultimate decision on whether to sell, and to whom, rested squarely with Shari Redstone, the head of National Amusements. Her decision-making process was undoubtedly influenced by factors unique to NAI's financial situation and her family's legacy, considerations that may differ from the simple goal of maximizing the sale price for all public shareholders.

The story of National Amusements, founded by the legendary Sumner Redstone and now led by his daughter Shari, is a masterclass for investors. It teaches us that value investing goes far beyond analyzing balance sheets and income statements. It's about understanding the intricate web of power, people, and incentives that truly govern a company. Before investing in a company like Paramount, you must ask yourself:

• Do I trust the judgment and integrity of the controlling shareholder?
• Are their long-term goals aligned with my own as a minority investor?
• Is the stock's price cheap enough to compensate me for the considerable risk of having no voice and being subject to the whims of a single entity?

In this corporate kingdom, National Amusements is the throne, and all other shareholders are merely subjects in the court.