ViacomCBS said it plans to sell $3 billion in stock and would uses some of the money it raises to invest in streaming.
ViacomCBS is among the major media companies trying to pivot to streaming. It recently launched Paramount Plus, a direct-to-consumer subscription streaming service. In 2019 it acquired Pluto TV, an ad supported streaming platform, for $340 million.
Media stocks have risen as the companies have raised their estimates of how many streaming subscribers they expect to add over the next few years.
A year ago, after Viacom and CBS were combined, ViacomCBS shares traded at $11.28. They were $36 in December and closed Monday at $100.34.
In early trading on Tuesday, ViacomCBS shares were down more than 7%.
Viacom said it would be selling $2 billion of Class B common stock and $1 billion in series A. mandatory convertible stock.
ViacomCBS said it intends to use the proceeds from the sales “general corporate purposes including investments in streaming,” according to its filing.
Analyst Todd Juenger of Sanford C. Bernstein said that it made sense for ViacomCBS to sell stock with its shares at such high prices.
Juenger was not a fan of ViacomCBS plowing more money into streaming, which he said appears to be a business with a very thin margin. He said said he would prefer the company use the proceeds from the stock sale to reduce its debt.
“As admirable as it is for a company to issue shares, essentially admitting they are fully valued (if not overvalued), it could trigger more shareholders to take profits,” he said. “We haven't encountered any professional investors defending upside in the stock, since it was trading at about $25.”
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