After dropping more than 27% on Friday, the shares of ViacomCBS (NASDAQ:VIAC) are continuing to lose in Monday’s pre-market trading after it emerged that VIAC is caught in the fallout from troubles at private investment firm Archegos Capital Management. VIAC stock was off a further 3.6% as of 8:15 a.m. Eastern. Other streaming stocks are suffering similar fates.
Along with VIAC shares, Discovery (NASDAQ:DISCA, NASDAQ:DISCK) stock continued its slide in the wake of Wells Fargo’s downgrade. Analysts believe the that both of the companies have been greatly overvalued.
The negative sentiment surrounding streaming stocks is due in large part to the over-saturation of the industry. Every company from NBC to AT&T (NYSE:T) has seen the great success of Netflix (NASDAQ:NFLX) and Hulu and wants to get a piece of the action. As Brenden Rearick wrote for InvestorPlace, “what started as a convenient way to aggregate shows without cable is turning into a mess of what are essentially decentralized cable packages.”
VIAC Stock Stake Sold Off At Steep Discount
Archegos was behind billions of dollars worth of block sales on Friday. The fund had large exposures to ViacomCBS and was hit hard after the Wells Fargo assessment. The declines prompted a margin call from one of Archegos’s prime brokers, prompting similar calls for cash from other banks.
According to statements from Credit Suisse (NYSE:CS) and others, Archegos defaulted on margin calls made last week by a handful of banks. Many experts are warning that Monday trading could be volatile in the aftermath of the block sales, particularly in the companies affected.
Discovery investors were having a good month, with DISCA stock up more than 50% through March 19. Similarly, before getting hit with the one-two punch, VIAC stock had seen a more-than-55% gain in the same period.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.
