Sumner Redstone said he decided to fire Tom Freston because of Viacom’s lagging share price – but the decision has already cost Redstone himself more than $113 million as the boardroom tumult sent shares tumbling.
If Redstone expected that his stunning Labor Day ouster of Freston would pay off in the company’s share price, he has a lot of ground to make up.
In two days of trading, the unexpected firing of Freston – a decision made, in part, because Viacom’s share price had not performed as Redstone would have liked – Viacom stock has lost nearly $3 per share.
The drop has resulted in a loss, on paper, of more than $113 million for Redstone, the controlling shareholder.
Redstone, who is known for obsessively worrying about short-term movements in Viacom’s stock price, holds more than 40 million shares, according to the company’s most recent proxy filing.
Earlier this year, Redstone split his media empire into two publicly traded companies – Viacom and CBS, the latter helmed by Les Moonves. Viacom was expected to be the faster growing company, but instead CBS has been the better bet for investors.
When Redstone axed Freston, he cited Viacom’s stock performance relative to how CBS has traded.
“I think the board, in the normal human sense, was also taking a look at our stock and comparing it with CBS,” Redstone said Tuesday. “Whereas CBS was making new highs, we were $7 or $8 down from where our high was.”
Yesterday Viacom lost 75 cents to close at $34.14 per share. In the two days that Wall Street has had to digest the news of Freston’s ouster, the stock has lost $2.83 per share.
Yesterday Merrill Lynch analyst Jessica Reif-Cohen wrote in a research report that Redstone “emphasized his and the board’s impatience with the decline in Viacom’s stock price over the past eight months as a key factor in the decision to replace Mr. Freston, which suggests to us an emphasis on short-term stock movements rather than long-term strategic goals.”
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In reverse
Viacom honcho Sumner Redstone is taking a $113 million hit in paper losses since he fired CEO Tom Freston – a move he saw as a share booster.
Viacom – Close $34.20 (-77ó)