Sumner Redstone Resignation Causes Spike in Viacom and CBS Stock
Analysts presumed that big changes were also in store at Viacom, the company behind Paramount Pictures, MTV, Comedy Central and Nickelodeon.
News that an ailing Sumner Redstone has relinquished his post as executive chairman of CBS sent shares of not only that company but also Viacom higher, though the 92-year-old media mogul remains executive chair at the latter.
CBS stock rose 4 percent to $48.26 during the regular session Wednesday and jumped another 4 percent after the closing bell when the company disclosed Redstone's resignation.
Viacom shares closed 2 percent higher to $44.67 on Wednesday, then spiked 9 percent after the closing bell as analysts presumed that big changes were also in store at Viacom, the company behind Paramount Pictures, MTV, Comedy Central and Nickelodeon that has seen its stock decimated over the past two years.
"We thank Sumner for his service and a tremendous entrepreneurial career in building a great set of assets," read a statement from SpringOwl Asset Management, which has been exceedingly critical of Redstone and CEO Philippe Dauman's management of Viacom.
"The positive jump in share price in after-hours trading demonstrates shareholder approval for these changes. We strongly urge management and the board to appoint an independent director as executive chairman and that it not be Philippe Dauman," said SpringOwl.
Brian Wieser of Pivotal Research quickly raised his price target on Viacom to $59, up from $53 previously.
"While a net positive for CBS, the more significant implication is for sibling company Viacom, where changes at the top of the organization should lead to a re-rating of the stock by many investors," Wieser wrote.
"Wall Street would likely bid up Viacom shares if Philippe were out — whether that truly mattered in the long run or not," added Steve Birenberg of Northlake Capital Management.
John Janedis of Jefferies was one of the few analysts rising to defend Dauman on Wednesday, writing that "there is value in the continuity of leadership" especially given "recent improvement in operations at Viacom."
Janedis also wrote that "the market's immediate reaction will be to bid the group higher," and he specifically named (along with CBS and Viacom) Time Warner and Scripps Networks Interactive, both of which are viewed as takeover candidates.
Meanwhile, James Goss of Barrington Research was touting the promotion of Moonves, who remains CEO at CBS while also assuming Redstone's former role of executive chairman.
"He deserves to be recognized as the visionary leader that he is," Goss said of Moonves, noting strength at Showtime and ratings leadership at CBS. Goss also credits Moonves for "saving the network" by charging retransmission fees.
Georg Szalai contributed to this report.
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