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Why ViacomCBS Stock Tumbled 30% Last Month

By Jeremy Bowman - Apr 2, 2021 at 10:00PM

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An investment firm blowup helped sink the media stock last month.

What happened

It was a roller-coaster month for ViacomCBS (PARA -5.83%), whose shares continued their surge from earlier in the year for the first three weeks of March before tumbling as a major investor was forced to dump his shares to cover losses elsewhere.

The broadcaster, which owns CBS, Comedy Central, Nickelodeon, MTV, and other networks, gained early in the month as it launched its new streaming service, Paramount+, but finished the month down 30% according to data from S&P Global Market Intelligence

A man streaming a movie on a tablet.

Image source: Getty Images.

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

VIAC Chart

VIAC data by YCharts

So what

For much of March, investors were encouraged by a drumbeat of good news from the entertainment company. Paramount+ successfully launched on March 4, joining the streaming fray at a time when Americans are eager for new home entertainment options, and analysts mostly cheered the pivot to streaming. The stock surged on March 8 after Oprah Winfrey's interview with Prince Harry and Meghan Markle proved to be a smash hit, drawing 17.1 million viewers, a big win for CBS at a time when broadcast networks are struggling. Shares got another bump on March 18 when the company extended its deal with the NFL through 2033, securing another valuable source of viewership. 

The stock began reversing after ViacomCBS announced a secondary offering worth $3 billion after hours on March 22 -- diluting investors by about 5% at the time -- to fund its streaming initiatives. That offering, combined with pressure on Bill Hwang's Archegos Capital Management, which was overleveraged in other falling stocks and forced to sell blocks of stock in ViacomCBS, pressured a stock that had already seemed inflated.  

ViacomCBS fell by more than 50% in just four sessions before balancing out in the last few sessions of the month.

Now what

The company priced its secondary offering at $85 on March 24, but it's unclear if it was able to sell the stock at that price as shares were plunging quickly that week and finished the month at just $45.10.

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

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

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