Shares of ViacomCBS and Discovery continued their dramatic plunge on Friday, each closing more than 27%.
This dropped ViacomCBS by more than 50% a week, while Discovery fell by about 45%.
Shares of ViacomCBS began to fall earlier this week after the company announced it would raise $ 3 billion from new share offerings. It was also downgraded to underweight from equal weight by Wells Fargo, which also downgraded Discovery from overweight to equal weight.
ViacomCBS and Discovery were short-circuited companies, as investors remain skeptical of companies’ long-term prospects in the crowded media landscape. The contagion effect of the recent brief pressures on GameStop and AMC Entertainment (not AMC Networks) has led prudent investors to cover bets on ViacomCBS, Discovery and AMC Networks, as previously reported by CNBC.
“It simply came to our notice then [ViacomCBS] it moved from a short net position, where there was a tightening and there were not a lot of available shares, and then the company issued a lot of new shares, “Charles Bobrinskoy of Ariel Investments said on Wednesday.” This has changed the dynamic in which there is not the same type of short tightening. “
Investors also followed the withdrawal of a signal from ViacomCBS management suggesting that the shares were overvalued.
“I never thought we would see Viacom trade close to $ 100 a share,” said Moffett Nathanson analyst Michael Nathanson. “Obviously, ViacomCBS management didn’t do that either, as they properly sold $ 3 billion in stocks / conversions at high levels to help clean up the leveraged balance sheet and invest more in streaming.”
– CNBC’s Alex Sherman contributed to this report.
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