Shares of ViacomCBS and Discovery continued their dramatic drop on Friday, each closing more than 27%.
This has caused ViacomCBS to lose more than 50% during the week, while Discovery has fallen by about 45%.
Shares of ViacomCBS began to fall earlier this week after the company announced it would raise $ 3 billion for new stock offerings. Wells Fargo also lowered the underweight category to an equal weight, which also lowered Discovery from overweight to equal weight.
ViacomCBS and Discovery have been very small companies, as investors remain skeptical about the long-term prospects of companies in the crowded media landscape. The contagious effect of recent tightenings on GameStop and AMC Entertainment (not AMC Networks) caused suspicious investors to place bets on ViacomCBS, Discovery and AMC Networks, as previously reported by CNBC.
“What has changed is [ViacomCBS] it moved from a clean short position where there was strong pressure, and there was not much stock available, and then the company issued many new shares, “Charles Bobrinskoy of Ariel Investments said on Wednesday.” That changed the dynamic where there is not the same kind of short compression. “
Investors also tracked the decline to a signal from ViacomCBS management that suggested equity was excessive.
“We never, ever thought Viacom would trade near $ 100 a share,” said Moffett Nathanson analyst Michael Nathanson. “Obviously, the management of ViacomCBS also failed to properly sell $ 3 billion worth of shares / conversions at high levels to help clean up its leverage balance and invest more in transmissions.”
– CNBC’s Alex Sherman contributed to this report.
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