The ViacomCBS merger news came as a relief to many Tuesday, with some investors and observers tipping their hats to the new company’s prospects and the stocks of both companies ticking up 2% on the news.
But there were also plenty of naysayers, and not all of the blowback was confined to social media.
Todd Juenger, an analyst with Bernstein Research and a longtime Viacom bear, downgraded CBS to “underperform,” lowering his 12-month price target on the shares. “What a shame,” he lamented of the deal, using the phrase as the title of his note to clients. “We believe whatever synergies are produced (we assume $750 million) will pale in comparison to CBS shareholders investing Viacom’s structural problems,” he wrote.
Money the new company invests in direct-to-consumer offerings, he went on, will be “wasted building a product that nobody wants.”
Juenger, it should be noted, did not represent the majority view from Wall Street analysts, whose sentiment generally on the companies has been neutral to positive lately.
The analyst had company, though, in Mario Gabelli, the noted fund manager and CNBC regular whose company, Gamco, owns 9% of Viacom voting. In a discursive, oddly punctuated series of tweets, Gabelli seemed to suggest legal consequences are in store for the merger.
“Breach of fiduciary duty,” he wrote. “Lawyers at work.” His complaint appeared to center on “appraisal rights” for shares and the decision to convert voting shares without preserving those rights. “Humbug!” The net result was Viacom shareholders having to accept a valuation that he did not view as fair.
In some press reports, Gabelli indicated he was considering legal action, though no paperwork has been filed.
On a less material level, there was the name ViacomCBS, which many on Twitter found unwieldy. Derided as a clumsy throwback to AOL TimeWarner or Excite@Home (ouch) or the CW (a tortured reworking of the WB network once CBS (the “C”) became part-owner.
Analyst Rich Greenfield, formerly with BTIG, issued a Twitter poll. “How long until it’s just Viacom?” he asked. In the lead as of Tuesday night: “1 to 3 Years,” with 47% of the vote.
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