ViacomCBS stock dropped nearly 9.1% Tuesday, as investors exited positions on news that the media conglomerate will sell up to $3.45 billion in stock as part of funding streaming content.
The company’s shares closed at $91.25 apiece, coming a day after ViacomCBS’ announcement of plans to raise $3 billion in a stock offering. In addition, the offering’s underwriters have the option to purchase up to an additional $450 million in stock.
The stock sale represents a dilution of existing shareholders’ equity. Still, even with Tuesday’s selloff, shares of ViacomCBS are up around 145% since the start of the year. The conglom’s market cap currently stands at $56.5 billion, nearly 2.5 times its value as of Dec. 31, 2020 ($23 billion).
The company is making a significant bet on Paramount Plus, which debuted March 4 and subsumed the subscribers of the previous CBS All Access service. At the end of 2020, ViacomCBS tallied some 29 million subscribers for its streaming platforms worldwide and has told investors it is targeting 65 million-75 million customers by 2024.
Last year ViacomCBS spent about $15 billion companywide on content including sports rights. By 2024, the media conglomerate expects to spend around $5 billion on streaming content, some of which will include the cost of content for both linear TV and streaming platforms.
Viacom and CBS completed their merger in December 2019. The media and entertainment company’s portfolio includes CBS, Showtime, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount Plus and Pluto TV.