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Why ViacomCBS Stock Crashed Again Today

By Rich Smith - Mar 23, 2021 at 12:45PM

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Are investors overreacting to news of a stock offering?

What happened

ViacomCBS (PARA 1.30%) shareholders cannot catch a break. Last week, shares of the broadcaster (and over-the-top streamer) tanked on news that two separate analysts had downgraded the stock. No sooner had Viacom shares recovered from that sell-off, though, than we got today's news: ViacomCBS is selling $3 billion in stock, diluting its shareholders -- and sending its shares down 7.2% as of 11:45 a.m. EDT.

So what

As ViacomCBS announced last night, it will run concurrent offerings of $2 billion worth of new Class B common stock and $1 billion worth of Series A mandatory convertible preferred stock. Additionally, should underwriters exercise their full overallotment options, the company would issue another $300 million of the common stock and $150 million of the preferred.  

Total potential stock issuance: $3.45 billion in new equity.

White arrow declining sharply atop a stock tickertape display bathed in red

Image source: Getty Images.

On a stock with a $57.7 billion market capitalization, that works out to as much as 5.6% stock dilution, which is probably the reason the stock is down today.

Now what

Now, the news isn't entirely bad. ViacomCBS says it will use the cash raised from these concurrent stock offerings "for general corporate purposes," but also "including investments in streaming." And that sounds like the company wants its new Paramount+ service to be a player in the over-the-top streaming sector -- about the only part of the cable industry that is growing right now.

Honestly, I can think of worse ways to spend the money.

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