Why ViacomCBS stock fell 30% last month

What happened

It’s been a roller coaster month for ViacomCBS (NASDAQ: VIAC), whose shares continued to climb since the start of the year for the first three weeks of March before falling as a major investor was forced to dump their shares to cover losses elsewhere.

The broadcaster, which owns CBS, Comedy Central, Nickelodeon, MTV and other networks, gained earlier this month by launching its new streaming service, Paramount +, but ended the month down 30% according to data from S&P Global Market Intelligence.

Image source: Getty Images.

As you can see from the chart below, the stock climbed steadily until March 22, when it plunged sharply over the following days.

VIAC chart

VIAC given by YCharts

So what

Through much of March, investors were encouraged by a drumbeat of good news from the entertainment business. Paramount + launched successfully on March 4, joining the streaming fray at a time when Americans are hungry for new home entertainment options, and analysts have mostly applauded the streaming hub. Action jumped on March 8 after Oprah Winfrey’s interview with Prince Harry and Meghan Markle turned out to be a smash hit, drawing 17.1 million viewers, a big win for CBS at a time when the broadcast networks are in trouble. Shares saw another bump on March 18 when the company extended its deal with the NFL until 2033, securing another valuable source of audience.

The action began to reverse after ViacomCBS announced a $ 3 billion after-hours secondary offering on March 22 – diluting investors by about 5% at the time – to fund its streaming initiatives. The offer, combined with the pressure on Archegos Capital Management from Bill Hwang, who was over-leveraged in other declining stocks and forced to sell blocks of shares in ViacomCBS, put pressure on a stock that seemed already inflated.

ViacomCBS fell over 50% in just four sessions before leveling off in the final sessions of the month.

Now what

The company valued its secondary offer at $ 85 on March 24, but it is unclear whether it was able to sell the stock at that price, as the shares plunged rapidly that week and ended the month at just 45. $ 10.

After the sale, the stock is now trading where it started the year, at a price / earnings ratio of around 10. This sounds like a good price for a company that has just started streaming with a library. respectable content, given its ownership of Paramount Studios, CBS, and several popular cable networks. The company said it is targeting 65 to 75 million subscribers by 2024.

Given the streaming service’s anticipation and the share’s extreme volatility, investors will be watching the company’s next earnings report in early May closely.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Roberto Frank

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