Shares of ViacomCBS, the media goliath led by Shari Redstone, took a nosedive 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 trading on Friday it had fallen to just over $48, a drop of more than 51 percent in less than a week. There’s no better way to say it: The company’s stock tanked. What happened? Several things all at once. First, it is worth noting that ViacomCBS had actually been on a bit of a tear up until this week’s meltdown, rising nearly tenfold in the past 12 months. About a year ago, it was trading at around $12 per share. That rally came as the company, like the rest of the media industry, had made a move toward streaming. It recently launched Paramount+ to compete against the likes of Netflix, Disney+, HBO Max and others. The service tapped ViacomCBS’s vast archive of content from the CBS broadcast network, Paramount Film Studios and several cable channels, including Nickelodeon and MTV. That shift matters because ViacomCBS has been hit hard by an overall decline in cable viewership. The company’s pretax profits have fallen nearly 17 percent from two years ago, and its debt has topped more than $21 billion. But the stock rose so much that Robert M. Bakish, ViacomCBS’s chief executive, decided to take advantage of the boon by offering new shares to raise as much as $3 billion. The underwriters who managed the sale priced the offering at around $85 per share earlier this week, a discount to where it had been trading on Monday. You could say it backfired. When a company issues new stock, it normally dilutes the value of current shareholders, so some drop in price is expected. But a few days after the offering, one of Wall Street’s most influential research firms, MoffettNathanson, published a report that questioned the company’s value and downgraded the stock to a “sell.” The stock should really only be worth $55, MoffettNathanson said. That started the nosedive. “We never, ever thought we would see Viacom trading close to $100 per share,” read the report, which was written by Michael Nathanson, a co-founder of the firm. “Obviously, neither did ViacomCBS’s management,” it continued, citing the new stock offering. Streaming is still a money-losing enterprise, and that means the old line media companies must still endure more losses over more years before they can return to profit growth. In the case of ViacomCBS, it seemed to hasten the cord-cutting when it signed a new licensing agreement with the NFL that will cost the company more than $2 billion a year through 2033. As part of the agreement, ViacomCBS also plans to stream the games on Paramount+, which is much cheaper than a cable bundle. As the games, considered premium programming, shift to streaming, “the industry runs the risk of both higher cord-cutting and greater viewer erosion,” Mr. Nathanson wrote. On Friday, the hedge fund Tiger Cub Archegos Capital Management sold 30 million shares of ViacomCBS in an apparent move to liquidate the fund, according to a report from the trade news site IPO Edge. Still, that would only account for about $2 billion worth of stock. The company has altogether seen about $30 billion of market value evaporate in a matter of days. Also on Friday, an analyst with Wells Fargo also downgraded the stock, slashing the bank’s price target to $59. But the market decided it wasn’t even worth that much. It closed on Friday barely a quarter above 48 bucks.
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