- ViacomCBS shares hit on Friday as part of a rumoured hedge fund liquidation.
- VIAC had earlier sold off as a capital raise was announced.
- The stock dropped 27% on Friday as block sales were sold.
ViacomCBS shares were one of the main victims of heavy selling in media and related stocks on Friday. Initial market reports had been that large blocks of stock were offered for sale hitting Viacom and Discovery. Over the weekend news reports and rumours emerged that these sales were possibly tied to Archegos Capital Management. IPO Edge broke the story.
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VIAC stock quote
ViacomCBS shares closed on Friday at $48.23, a loss of 27.3%! VIAC shares had traded above $100 at the start of the week.
ViacomCBS shares had already come under selling pressure when they announced a capital raise via class B common stock and convertible preferred stock. The combined stock offering is to raise between $2.65 and $3 billion. VIAC said it will use the money for general corporate purposes and investments in streaming. The rise of streaming and Netflix and Disney+ have changed the landscape, and ViacomCBS needed to quickly adapt to keep up. Viacom launched Paramount+ streaming service earlier in 2021.
VIAC shares were trading around $100 at the time of the announcement, and the shares were to be offered at $85. VIAC shares retreated 9% on the announcement. Moody's commented that the raise was a credit positive event.
The selling pressure accelerated on Wednesday, March 24, with VIAC losing 23% to close at $70.10. Thursday saw further losses of 5% before Friday's capitulation saw ViacomCBS shares drop below $40 before closing at $48.23 for a 27% loss.
Rumours began to swirl on Friday of large blocks of ViacomCBS shares being offered. Over the weekend reports have emanated from several sources that the selling is rumoured to be the results of the liquidation of positions held by Archegos Capital Management. It should be noted that this is not confirmed but has been widely reported in the financial press.
The issue appears to be a concentration of positions taken by Archegos in a small number of stocks. A move can become self-fulfilling in this case. Selling pressure comes on a stock. A client is requested to post extra margin by its investment bank to cover these losses. If the client cannot post the additional margin, the investment bank will sell the clients positions until it has sufficient margin to reduce its exposure. This appears to be the case here.
Other stocks have also been caught up in the block selling with Discovery and Baidu rumoured to be part of the forced liquidation. Baidu (BIDU) has fallen from $260 to $200 in the last three sessions. Discovery (DISCA) lost nearly 50% of its value last week.
Investment bank shares are all suffering in European trading this morning. Credit Suisse warned of a hit to first-quarter results due to its exiting positions with a large US hedge fund. Nomura issued a similar statement.
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