ViacomCBS shares fell more than 23% ($21.25 each) in early trading Wednesday after the programmer priced a new stock offering to raise $3 billion for its streaming efforts well below its previous day’s price.
ViacomCBS stock fell as low as $70 per share March 24, down 23.3% or $21.25 each. The stock closed at $70.10 (down 23%) on Wednesday.
It was the second day of declines for the stock. ViacomCBS shares fell 9% ($9.09 each) on Tuesday, closing at $91.25 per share.
The programmer said March 22 that it would raise $3 billion for general corporate purposes and its streaming efforts through two offerings -- $2 billion in Class B stock and $1 billion in 5.75% Series A Mandatory Convertible Preferred stock -- which was praised by most analysts given the ascent of the shares since the company launched its Paramount Plus streaming service. ViacomCBS stock has more than doubled this year from $37.16 each on Dec. 31 to $91.25 per share on March 23.
On Wednesday the programmer said it would offer 20 million shares of Class B stock at $85 per share and 10 million shares of the preferred stock at $100 each, which apparently forced some investors to take profits.
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Several analysts have warned in the past that ViacomCBS shares were overvalued, caught up in the frenzy over streaming video. In a research note Tuesday, Bernstein media analyst Todd Juenger, who has said for months that the shares were overvalued, wrote that as long as they didn’t intend to set the proceeds from the offering on fire, it was a good move for Viacom. But he warned it could backfire.
“We haven't encountered any professional investors defending upside in the stock, since it was trading at about $25,” Juenger wrote. “If it's mostly algorithms and retail investors trading the stock at this level, neither of those ‘buyers’ are eligible to get an allocation.
“Additionally, as admirable as it is for a company to issue shares, essentially admitting they are fully valued (if not overvalued), it could trigger more shareholders to take profits,” Juenger continued. “If the momentum reverses, plus equity dilution, the algorithms may finally stop liking this stock, too.”
