VIAC Stock price: ViacomCBS Corporation Common Stock struggles to recover from Archegos sell off

• VIAC shares still in Archegos hangover mode on Wednesday.
• ViacomCBS shares halved after Archegos blows up.
• VIAC bounced on Tuesday but down again on Wednesday.

ViacomCBS is giving investors a tough time recently as the shares suffered a sharp fall post the Archegos debacle. Archegos was is a hedge fund/family office that is reported to have taken large positions in certain TMT stocks (tech, media, telecom). Archegos is reported to have failed to meet a margin call from one of it's investment bank account holders and this resulted in a domino effect as multiple banks began liquidating positions across a number of related stocks. Discovery (DISCA) was also caught up, also shedding close to half its market cap in a number of sessions.

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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. 

Things progressed quickly last week with Friday seeing VIAC shares lose over 27% to close the week at $48.23. VIAC shares had started the week at $99.15!

IPO Edge then broke the news that the sharp price moves in some TMT stocks and VIAC and Discovery (DISCA) in particular were tied to Archegos Capital Management. Several investment banks warned of losses from an unnamed US client on Monday before the market opened. Credit Suisse and Nomura both made such statements on Monday and other investment banks were also under investor scrutiny to see if they were affected. 

Discovery (DISCA) was also one of the main stocks involved. In an unusual move on Wednesday shares of highly illiquid Discovery B shares rocketed over 80%. Market watchers puzzled as to the reasoning with it appearing retail traders were aggressively buying the B shares. The more normal A shares hardly moved by comparison. See more.

So where to from here. Difficult to say. Such a steep fall in such a short time might tempt bargain hunters as surely the fundamentals cannot have changed in the space of a week! However, the lack of any discernable bounce post the steep sell-off might indicate consolidation at lower levels. MACD is widening, a bearish sign and the strong performance of the broader stock market has not led to VIAC shares bouncing, again bearish sign. On the flip side, the P/E for VIAC just got a whole lot more impressive compared to its peer group and is now the lowest. Fox Corp trades at a P/E of 14 while VIAC is at 12 so not a huge discount. VIAC was obviously too high, having had a huge end to 2020. VIAC has merely retraced to where it was in January 2021.

At the time of writing, the author is long DISCA and VIAC shares. The author has no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

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