Posted by chicagomedia.org on October 14, 2008 at 13:54:09:
In Reply to: CBS stock slips posted by chicagomedia.org on October 13, 2008 at 13:13:38:
Shares of CBS initially slipped more than 4% Monday morning (Oct. 13) on slow Columbus Day trading after CBS and Viacom's largest shareholder, Sumner Redstone's family-controlled National Amusements, said Friday (Oct. 10) that it would sell 20% of its mammoth position in the companies in order to raise millions in order to pay down debt and meet credit covenants. But by day's end, shares in the radio empire and Tiffany Network rocketed upward with the rest of the market in the most historic rebound ever on Wall Street, closing 8% higher than Friday's close, up 64 cents at $8.74. Some 26.88 million shares of CBS were traded Monday, the Federal holiday generally a slow trading day, compared to the 30-day trading average of 9.79 million.
CBS shares were down more than 4%, or 30 cents, at $7.80 in mid-morning trading -- and trading light, as some 7.8 million shares had been sold. On Friday, CBS shares topped losers on the Radio & Records Index with a 20% decline in value, dropping to a 52-week low of $7.54 a share. Still, CBS shares are light years away from their 52-week high of $30.68 reached Oct. 11, 2007.
Shares of Viacom also rebounded strongly, up more than 23% in value, or $3.96 a share, to $21.06 with 362,401 shares traded, far higher than the 30-day average of 134,000 traded. It was all part of an across-the-board run-up on Wall Street, where the Dow Jones Index gained a whopping 11%, 936.42 points, to close at 9,387.61. The Nasdaq jumped nearly 12%, or 194.74, to close at 1,844.25, while the S&P 500 gained 11.5%, or 104.13 points, to end the day at 1,003.35.
But the morning outlook for CBS shares had been murky after a unit of the 85-year-old media titan's holding company said it intended to sell the huge block of CBS and Viacom non-voting shares. National Amusements, which was begun as the Redstone family's holding company for its New England-based movie theater chain, holds 46.8 million class A voting and 23.4 million class B non-voting shares in Viacom. It also holds the same amount of class A shares in CBS and 39.8 million of class B CBS shares.
In the end, the company sold 7 million shares of Viacom class B (non-voting) common stock and 17 million shares of CBS class B common stock for $233 million, far less than the $400 million-worth of CBS shares the company said it would sell on Friday, noted Wachovia Capital Securities analyst Marci Ryvicker in a client note. The analyst reported later in the morning that it was unclear whether the block of shares was sold through private placement after Friday's announcement or on the open market Monday morning. "We are waiting for confirmation from management," she noted.
As far as investing in shares of CBS goes, Ryvicker's conclusion was, "We are still cautious given the economic and advertising environment, but we believe this is a stock to watch given its cheap valuation, its apparently safe dividend (13% yield), and its significant free cash flow generation ($1.5 billion expected by year's end)."
(Jeffrey Yorke, Radio & Records)