ViacomCBS (NASDAQ:VIAC) shares jumped 3% in Tuesday trading on optimism that the unwinding in Archegos-associated companies shares could be over.
Viacom acquires Chilevision
The company’s Latin America push with the acquisition of a Chilean broadcaster added to the positive mood for the shares that have in recent weeks been subjected to the wrath of traders. The company will acquire Chilevision from AT&T Inc. (NYSE:T) as it looks to enhance its streaming operations in Latin America. According to ViacomCBS, Chilevision attracted almost a quarter of total television viewership in Chile last year.
Lately, ViacomCBS has been in the news for the wrong reasons. Last month the company indicated in a filing that it will raise almost $3 billion in new equity sales, which sent shares tumbling due to concerns of dilution. There is also the Archegos saga, with the family office heavily exposed to Viacom and other media companies’ stocks such as Discovery (NASDAQ:DISCA). There were margin calls with the stocks sliding, and Archegos couldn’t meet its broker’s demand, such as Nomura (NYSE:NMR) and Credit Suisse (NYSE:CS) they resorted to shares sale. The saga resulted in Credit Suisse incurring a $4.7 billion charge and a $2 billion charge for Nomura.
ViacomCBS struggling as Pay-TV declines
Since Viacom’s merger with CBS in 2019, the company has faced several challenges ranging from the COVID-19 pandemic to integrating a huge acquisition to changing business model with a focus on streaming. However, the company is still lagging streaming giants such as Netflix (NASDAQ:NFLX), Apple Inc. (NASDAQ:AAPL), and Disney (NYSE:DIS). Growing cord-cutting has exacerbated things as the number of pay-TV households continues to decline.
In the next five years, cable subscriptions will bottom at 50 million. Although ViacomCBS has 19.2 million subscribers, that are quite a small number compared to Netflix, which has more than 203 million paid subscribers globally. The company is trying to catch up with acquisitions such as Chilevision and Paramount+ streaming service last month. The streaming strategy is a bit late, but the company can leverage its CableTv subscribers and convert them to Paramount+.