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ViacomCBS is headquartered in Midtown Manhattan.
Mark Kauzlarich / Bloomberg
Sometimes it doesn’t take much to cool a red-hot stock once its movement is running out. That seems to be true with
ViacomCBS
and
Find
this week. The pair had been raining a few months ago as investors rallied into their previously unstoppable stocks.
Both legacy media companies have launched new streaming services and ambitious ambitious long-term membership targets that have encouraged investors, while reopening hope for wider benefits.
Now, some moderately negative news about each has prompted brutal setbacks in their stocks.
ViacomCBS
stock (ticker: VIAC) fell more than 20% in trading on Wednesday after the media company offered a price to offer its stock below their latest market price. It follows a 9% fall Tuesday, and a dramatic rally before that: Shares had doubled since the beginning of February, and had risen nearly nine times from their base at the end of March 2020.
ViacomCBS stock closed above $ 100 on Monday, before falling back to mid-$ 70s Wednesday on heavy trading volume. That’s a painful decline, but just bringing the stock back to where it was trading about two weeks earlier.
On Monday afternoon, ViacomCBS filed to raise about $ 3 billion through the sale of nonvoting common class B stock and best convertible stock. He announced the prices of those two offers on Wednesday, and institutional investors apparently were unwilling to rally the stock. The average stock offer of 20 million shares was priced at $ 85 per pop, or some 7% lower than its closing price of $ 91.25 on Tuesday. The company had been hoping for an increase of closer to $ 2 billion from common stock sales, compared to the $ 1.7 billion they are selling.
Our preferred stock offer has an annual yield of 5.75%. The shares will convert to class B common stock in 2024 at a rate between around 1 and 1.2, depending on the price of the common stock at the time. ViacomCBS preferred options trade under the VIACP ticker.
Both ViacomCBS offers are expected to close by the end of the week. They represent a dilution of less than 6% at normal levels.
Stock Discovery (DISCA) has similarly broken into this week. At a high of $ 77.27 near Friday, the shares had been sitting on a nearly 300% return since early November. They fell 3.4% on Monday, 4% on Tuesday, and were down more than 10% on Wednesday afternoon. However, these declines only remove benefits from March 10th.
Probably a decline from
UBS
Tuesday. Analyst John Hodulik moved to a Sell rating, from Neutral, citing valuation concerns even after a strong start for Discovery +.
“Against a backdrop of shifting media consumption and a decline in the serial ecosystem, we believe Discovery’s pivot to DTC is the right one,” Hodulik wrote. “At the same time, we intend to focus on investments for DTC and worsening trends in the serial ecosystem. [profit] medium-term growth. With shares at high-end levels and the understandable valuation of the streaming industry trading far above Netflix [NFLX] multiples, we believe the stock reflects an unattractive prize-winning equation at current levels. ”
Hodulik estimated that the market valued Discovery’s streaming business at around 20 hours 2023 revenue – which is comparable to
Netflix
(NFLX) has been trading at 6 to 10 times their revenue estimate over the past three years.
For both ViacomCBS and Discovery stocks, the prospect of direct streaming may have been dashed. With each week of double-digit gains, the number of investors willing to keep accumulating at ever-louder valuations grew.
“To see a reversal of ViacomCBS’s current valuation requires strong belief that Paramount + will become a leading global streaming service, something we are looking for at this point,” Credit Suisse analyst Douglas Mitchelson wrote in a report on Monday. “We rarely come across an established investor (growth or value) who currently owns ViacomCBS, and instead sees investors coming in with momentum driven – to call Yogi Berra, ‘No one goes there anymore because it’s too crowded. ‘”
It didn’t take much bad news to send them off for the tours.
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