Viacom CBS shares, Shari Redstone-led Media Goliath, took a zero this week, with the company losing more than half of its market value in just four days.
The stock was as high as $ 100 on Monday. By the close of Friday’s trade, it had fallen to just $ 48, falling more than 51 percent in less than a week.
There is no better way to say it: the company’s stock is soldering.
What happened? Many things at once. First of all, it is worth noting that ViacomCBS was actually shedding a little tear until this week’s recession, which increased by almost ten times the previous week. About a year ago, it was trading at around $ 12 per share.
The rally came as the company, like the rest of the media industry, had taken a step towards streaming. It has recently been launched Paramount + To compete against the likes of Netflix, Disney +, HBO Max and others. The service tapped Viacombs’ vast collection from the CBS broadcast network, Paramount Film Studios, and several cable channels, including Nickelodeon and MTV.
This change matters because ViacomCBS has been hit hard due to the overall decline in cable viewership. The company’s pretax profits fell nearly 17 percent two years ago, and its debt exceeded $ 21 billion.
But the stock rose so much that ViacomCBS CEO Robert M. Bakish decided to take advantage of the boon by offering new shares to raise more than $ 3 billion. Earlier this week the underwriters arranged the sale with an offer of around $ 85 per share, where it was trading on Monday.
You can call it backfire. When a company issues new stock, it usually depreciates the value of the current shareholders, so some fall in the price is expected. But a few days after the offering, Moffetthanathan, one of Wall Street’s most influential research firms, published a report that questioned the company’s value and downgraded the stock to “sell”. The stock should actually be worth only $ 55, MoffettNathanson said. This started Nozive.
“We never thought we would see Viacom Trading closer to $ 100 per share,” read the report, which was written by the firm’s co-founder Michael Nathanson. “Obviously, neither ViacomCBS’s management,” it continued, citing the new stock offering.
Streaming is still a money-losing venture, and this means that old-line media companies will still have to incur more losses over the years before returning to profit growth.
In the case of ViacomCBS, when it was a new signing, cord-cutting was hasty Licensing Agreement with NFL The cost would cost the company more than $ 2 billion a year through 2033. As part of the agreement, ViacomCBS plans to stream the games on Paramount +, which is much cheaper than the cable bundle.
As for sports, the shift in streaming to supposedly premium programming, “the industry runs the risk of both high cord-cutting and greater viewer erosion,” Mr. Nathanson wrote.
On Friday, hedge fund Tiger Cube Archgos Capital Management sold 30 million shares of Viacombs in an apparent move to liquidate the fund. A report from the business news site IPO Edge.
Even then, it would only be for $ 2 billion worth of stock. The company has seen a total market value of about $ 30 billion evaporate in a few days.
In addition, an analyst at Wells Fargo downgraded the stock on Friday, raising the bank’s price target to $ 59.
But the market decided that it was not worth that much. It closed barely a quarter above Rs 48 on Friday.