ViacomCBS tumbles on stock offeringViacomCBS tumbles 23.18% following Wednesday’s stock offering. The recently reunited company (which was forced to separate by the Federal Communications Commission back in 1970) has had a rough week, but could brighter days be on the horizon?
First came love, then came the merger. Now comes a new streaming service that the media and entertainment giant is hoping to fund with a roughly $3 billion offering of equity securities.
Paramount+ was launched on March 4 and is competing directly with the big boys like Disney+ (DIS) and Netflix (NFLX). ViacomCBS says it expects to invest up to $5 billion in its streaming content by 2024, up from a reported $1 billion last year, while also aiming to hit between 65 to 75 million subscribers. Go big or go home, right?
But the latest big loss came off the back of an already volatile 9% dip following the offering announcement, and the newly combined ViacomCBS is facing some doubt from investors, who aren’t sure if they can pull off the service in such a competitive marketplace. Analysts have warned that it might be hard to compete with “large scale streaming players” like Netflix (NFLX); and a Bank of America analyst wrote that the move to streaming is the “right strategy but hard to execute”.
An AB Bernstein analyst is on board with the secondary raise as it will give cushioning against a downturn in ad revenue; however, he also warned the stock is overpriced and that the company could “waste billions on streaming offerings that we believe will struggle to carry their own weight.”
ViacomCBS wasn’t the only streaming stock down this week. Discovery (DISCA), who have just launched Discovery+, closed down 13% after UBS downgraded it to a sell.
Despite Tuesday’s stock dip though, shares of ViacomCBS are up nearly 145% year to date, and up 92% since the start of the year; giving it a market cap of around $43.4 billion.