Precise Truth
Saturday, September 18, 2004
SEC Reports: CEO of Viacom (CBS) dumps nearly $12 million in Stock
At the height of Rathergate, it appears Sumner Redstone, Chairman and CEO of Viacom Corporation, has issued his first verdict on the collapse of credibility for its CBS News operation and 60 Minutes programming. In disclosure mandated by the SEC, "STATEMENT OF CHANGES OF BENEFICIAL OWNERSHIP OF SECURITIES", Redstone reveals his transaction promptly followed the disasterous & defiant appearance by Dan Rather on last Monday evening's edition of the CBS Evening News. In official filing, and with Viacom currently selling near 5 year lows, records reveal Redstone sold 341,500 shares of Viacom stock options, with an otherwise undisclosed 401K account, significant NAIRI, Inc. investment and spousal holdings remaining, on Tuesday of last week, September 14, 2004. Overall, with reported shares still selling for $11,952,500, though valued at only $35 a share, his gross profit from the transaction appears to have yielded around $6,744,625 in cash. While that might represent only 1/2% of his total holdings and pose no challenge to his shareholder standing, it does appear to be the first transaction of its type (reported for Redstone) in the past 2-3 years.

FOLLOW-UP: Questions arise as to whether Redstone might be guilty of insider trading. My guess is, in court, no, that he can expalin he either sold the stock for unrelated reasons (if that's indeed the demonstrable case) or that - more likely - he was responding to his own impression of the public events & meltdown we've all witnessed (and there's not a jury I'd ever serve on which wouldn't concur in those regards, Rather's stand being so indefensible).

Typically insider sales mean much less than they are often portrayed because even the boardrooms of America are filled with people, like you and I, who enjoy making those occasional extravagant purchases, add on to their house or whatever. In the real world, however, this transaction strikes me as the type of indicator totally outside the norms of everday business for companies in general and given Redstone's recent (lack of) trading history in particular (he certainly has plenty of cash on hand to buy a new boat or whatever in this time of perilous corporate crisis).

Typically, when a company faces some public challenge, the CEO and other "encouraged" directors use such an opportunity to BUY token purchases of stock, to relieve uncertainty in the marketplace. This model is particularly the case when company stock is trading at multi-year lows and it's preferred the market think the executives believe the company is currently undervalued in active trading.

My guess is that in many Wall St. circles Monday AM, Mr. Redstone's transaction will be a point of interest and further discussion, beyond moot gossip, especially amongst the dedicated folks who follow insider trading incessantly. Much of Viacom's stock is held in mutual funds and S&P 500 Index funds and the like which either won't or can't react with any volatility.

Other market factors aside, however, it's quite likely this news will lead to some selling pressure, obviously increasing the available float, a corresponding decrease in on-balance volume and an upcoming test of its price support at the 50 day moving average @ $34.06 or 2003-2004 lows of $33.60 and $32.02 respectively (having closed Friday last trade @ $34.60)

Viacom Stock (VIA.B) Chart here

UPDATE: Commentary from American Thinker, Hugh Hewitt and LGF :)

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