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Shares of CBS are falling 7 percent in midday trading on Friday after news broke in The Hollywood Reporter that Ronan Farrow’s latest New Yorker exposé includes sexual misconduct claims against CEO Leslie Moonves.
Meanwhile, a representative for Shari Redstone called for an announced CBS investigation of Moonves to be “open and transparent.”
Within minutes of the first news reports alleging bad behavior on the part of Moonves, the stock took a nosedive on surging volume, wiping out more than $1 billion in value and negatively impacting the wellbeing of some 21,000 CBS employees, many of whom hold shares in their retirement accounts.
Investors who are quickly hitting their “sell” buttons aren’t only worried about legal liabilities, they’re also signaling how important Moonves is to the future of CBS, not to mention Viacom, which had been discussing merging with its sister company, presumably with Moonves taking charge of the larger entity that would emerge in such a deal. The fact that investors are selling ahead of Friday’s blockbuster report from investigative journalist Ronan Farrow indicates that Wall Street has doubts that Moonves can survive at CBS.
Moonves is not only one of the most powerful media moguls on the planet, but also one of the most effective ones. Prior to Friday’s swoon, CBS shares had risen more than 1,200 percent in nine years, and he recently told Wall Street to expect record financial results in 2018, even as other media conglomerates are struggling to keep up with Netflix, Amazon, YouTube, Apple, Facebook and the like. The record profits he predicts are in large measure due to retransmission fees, which had only been paid to cable networks until Moonves introduced the concept to broadcast networks, as well.
His most recent challenge is attempting to wrest control away from National Amusements, run by Sumner Redstone and his daughter Shari. That entity holds sway over both CBS and Viacom through voting shares that Moonves is trying to dilute lest Shari try to force a CBS-Viacom merger under terms that are not advantageous to CBS.
But while CBS shares were falling on Friday, Viacom’s were up 4 percent, and CBS hinted that the drama involving CBS, Viacom and National Amusements might have something to do with the allegations against Moonves.
“The timing of this report comes in the midst of the company’s very public legal dispute. While that litigation process continues, the CBS management team has the full support of the independent board members. Along with that team, we will continue to focus on creating value for our shareowners,” the network said in a Friday statement.
A representative for Shari Redstone stated, “The malicious insinuation that Ms. Redstone is somehow behind the allegations of inappropriate personal behavior by Mr. Moonves or today’s reports is false and self-serving. Ms. Redstone hopes that the investigation of these allegations is thorough, open and transparent.”
CBS added that, “All allegations of personal misconduct are to be taken seriously. The independent directors of CBS have committed to investigating claims that violate the company’s clear policies in that regard. Upon the conclusion of that investigation, which involves recently reported allegations that go back several decades, the board will promptly review the findings and take appropriate action.”
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