Viacom punished after taking $785m charge

Viacom's massive writedown sparked hefty selling from investors, while the broader US market was modestly lower on Tuesday, dragged down by the utilities sector.

The cable TV conglomerate saw nearly $500m wiped off its market valuation on Tuesday after it said late on Monday that it was taking a $785m charge in the second quarter. The charge reflects planned lay-offs, underperforming shows, weak ad revenue and announced plans to halt its share buyback programme.

Shares fell 2 per cent to $67.28, taking the stock's losses since the start of the year to more than 10 per cent.

Analysts attribute the rise of subscription services such as Netflix, Hulu and Amazon Prime as part of the reason for Viacom's woes. The company, which owns MTV, Comedy Central and Paramount film studio, has been struggling with falling ratings as viewers increasingly turn to non-traditional outlets for entertainment.

"While we'd argue the long-term benefits of cost savings trump the delay of roughly $1bn in stock repurchases, we expect a negative reaction from the market," said John Janedis at Jefferies.

The downbeat mood over Viacom did not extend to the wider market, however, with another round of corporate dealmaking helping to push US stocks higher.

FedEx was temporarily the biggest gainer on the S&P 500. Shares in the US parcel delivery company rose 3 per cent to $171.16 as investors cheered its €4.4bn bid for European rival TNT Express.

Warren Buffett gave shares in Axalta Coating Systems, a US company that manufacturers liquid coatings used by the car industry, a fillip. The stock rose 10 per cent to $31.11 after the billionaire investor snapped up $560m worth of shares in the company.

Software companies are proving to be attractive targets for private equity groups. Informatica jumped 4 per cent to $47.79 after the Nasdaq-listed data software company agreed to be acquired by Permira and the Canada Pension Plan Investment Board for $5.3bn. Their offer of $48.75 a share represents a 6.3 per cent premium to the company's closing price on Monday.

Among the fallers, General Motors shed nearly 3 per cent to $35.73, after the Canadian government said it would sell its multibillion dollar stake in the Detroit-based automaker nearly six years after it helped bail it out.

Canada GEN Investment Corporation, which oversees the government's stake in the carmaker, said it had entered into an agreement to sell 73.4m shares of its GM common stock to Goldman Sachs. The sale was scheduled to be completed on April 10.

Canada Gen accounts for 4.56 per cent of GM's outstanding shares and is the company's third-largest shareholder, according to Bloomberg data. The stake would be valued at nearly $2.7bn based on Monday's closing price of $36.66.

The S&P 500 fell 0.2 per cent to 2,076.33, while the Dow Jones Industrial Average was little changed at 17,875.42. The Nasdaq Composite shed 0.1 per cent to 4,910.23.

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