The company, which bowed the Paramount Plus streaming service earlier this month in an expanded foray onto the streaming battlefield, announced Monday that it plans to sell $3 billion worth of stock. ViacomCBS said it plans to use the funds from the stock sales for “investments in streaming,” among other general corporate purposes.
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Following the announcement, shares of ViacomCBS were down about 4% in after-hours trading, after closing regular trading up 3% for the day. The stock has more than doubled in price since the beginning of 2021.
Last year ViacomCBS spent about $15 billion companywide on content including sports rights. By 2024, the media conglomerate expects to spend around $5 billion on streaming content, some of which will include the cost of content for both linear TV and streaming platforms.
The company is making a significant bet on Paramount Plus — promoting it with the tagline “a mountain of entertainment” — which superseded the previous CBS All Access direct-to-consumer service. ViacomCBS tallied some 29 million subscribers for its streaming platforms worldwide as of Q4 2020 and is targeting 65 million-75 million by 2024.
In the new offering, the company is selling $2 billion of Class B common stock and $1 billion of its Series A Mandatory Convertible Preferred Stock (which will automatically convert into a variable number of shares of Class B common stock on April 1, 2024, unless converted earlier). ViacomCBS also granted the offering’s underwriters, Morgan Stanley and J.P. Morgan, separate 30-day options to purchase up to an additional $450 million in stock.
ViacomCBS chose to raise capital through a stock sale rather than issue debt. The company’s long-term debt as of the end of 2020 was $19.7 billion, which is relatively high given that it reported adjusted operating income of $5.1 billion and free cash flow of $1.9 billion for full-year 2020.
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