Billionaire Sumner Redstone's National Amusements Inc. said Monday that it had sold $233 million worth of stock in Viacom Inc. and CBS Corp. to raise cash to comply with debt covenants -- $167 million less than the company said three days earlier that it would need.
On Friday, while the stock market was experiencing one of its most volatile trading days, National Amusements announced that it would unload $400 million in nonvoting shares of Viacom and CBS, a disclosure that prompted the two media companies to lower their earnings guidance.
Redstone, through his National Amusements, is the controlling shareholder of Viacom and CBS. Regulations require companies to issue guidance if an insider sells stock shortly before the release of earnings results. CBS and Viacom are expected to release results in the coming weeks. Such a stock sale by Redstone, a company insider, before worse-than-expected earnings might have been construed as insider trading.
Friday's gloomier guidance, not surprisingly, sent shares of both companies tumbling.
CBS shares lost one-fifth of their value Friday after CBS said its third-quarter earnings would be about 14% lower than last year and took a $14-billion noncash charge to reflect the diminished value of its TV and radio stations. Viacom shares lost 18% of their value.
"Viacom was in line with what we were projecting, but CBS was much, much worse," said Michael Nathanson, a media analyst with Bernstein Research. "That just shows the true deterioration of their business."
Both stocks regained ground Monday with the broader market rally. Viacom's nonvoting Class B shares climbed 26% to $20.80. CBS' nonvoting Class B shares rose nearly 8% to $8.74.
Why National Amusements decided to sell less of its holdings in Viacom and CBS than originally stated was unclear. Redstone may have been able to negotiate an agreement over the weekend with bankers to make smaller payments toward National Amusement's $1.6-billion debt, or he may have tapped other sources to satisfy his obligations. A spokeswoman for National Amusements declined to comment.
"There are more questions than answers," Nathanson said.
National Amusements said Monday that it had completed the sale of 17 million of CBS Class B shares and 7 million of Viacom Class B shares. It said it had no plans to sell additional shares.