UPDATED WITH REDSTONE ATTENDANCE INFO: Rallying this week as the company sought to assert its independence over its controlling shareholder, CBS’ stock tumbled back to earth today after a Delaware judge denied the company’s legal moves and the board is set to vote on a dilution measure that now is largely symbolic.

Shari Redstone Leslie Moonves

A vote that will see a face-off at Black Rock between CEO Les Moonves, whose independent directors led the court challenge, and Shari Redstone. Deadline has learned that CBS Board Vice-Chair Redstone plans to attend the board meeting in person this afternoon.

Needless to say after the week so far, it likely won’t be the most easy going of gatherings.
On Monday, the network and its independent board members had sought a temporary restraining order to prevent Redstone and National Amusement from interfering with a board ballot that would significantly water down her voting control over CBS. The ultimate aim of that move is to halt any potential Redstone desired merger with Viacom. Though essentially a gesture at best,  that vote to exchange non-voting shares in CBS for a class of stock with voting rights will still happen, the Les Moonves run media corporation insisted this morning after Chancellor Andrew Bouchard’s order knocking down their TRO motion.

Redstone family holding company NAI controls nearly 80% of CBS’s voting stock, appears to have neutralized the dilution threat with a last-minute bylaw change requiring 90% of the board members to approve such a measure. That’s not very likely, since Redstone is a member of the board as are Redstone family lawyers Robert Klieger and David Andelman, who also serves as a director of National Amusements.

The Delaware court indicated that the bylaw change is in effect and would need to be challenged to be found invalid, an interpretation shared by the Council of Institutional Investors in Washington, D.C. CBS, however, asserts the bylaw change won’t take immediate effect, citing a Securities and Exchange Commission rule that imposes a 20-day delay. Either way, the end result looks to be more legal dust-ups over the coming weeks and possibly months.

Against that courtroom backdrop, Wall Street seems to be leaning towards not wanting to see CBS melded again with Viacom.

Investor enthusiasm spiked Monday — at one point during the day,  shares were trading up 6% to $55.31 — on news that CBS had gone to court seeking protection from Redstone, whom the network claimed might replace board members or take other actions to force a merger with corporate sibling Viacom.

National Amusements has said repeatedly that it has no intention of strong-arming a deal that is not supported by both companies, and that CBS is really attempting to shrug off its controlling shareholder.

After today’s ruling, CBS stock dropped to $50.23 before recovering slightly to close at $51.61 today. That’s down 4% from the prior day’s closing price.

 

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Viacom’s stock, meanwhile, tumbled on the news of CBS’s lawsuit and has yet to recover — suggesting some market concern that a merger might not happen. The stock closed at $28.16, off less than 1% for the day.

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