Following yesterday’s announcement that Sumner Redstone was resigning his position as board chairman of CBS Corp.and be replaced by Leslie Moonves, shares in both CBS and Viacom enjoyed a significant bounce in after-hours trading.

92-year-old Redstone formely resigned his position as CBS board chairman late Wednesday

With concerns about the aging media mogul’s health ramping up in the last few months, investors of CBS and Viacom have been growing increasingly nervous.

CBS Corp. CEO Leslie Moonves will now take on the additional job of chairing the board at CBS.

CBS revealed that is had offered the non-executive chair to Shari Redstone before electing Moonves. “She declined in light of her other professional and personal responsibilities, and in recognition of her confidence in Mr. Moonves,” CBS said. Mr. Redstone is a vice-chair at Viacom as well running a venture capital company. Additionally, she is the president of National Amusements which is the controlling shareholder of both CBS and Viacom.

“As has been accurately reported, my father’s Trust states his intention that I succeed him as (non-executive) Chair at CBS and Viacom, and also names me as a Trustee after his death,” she said in a statement. “However, it is my firm belief that whoever may succeed my father as Chair at each company should be someone who is not a Trustee of my father’s trust or otherwise intertwined in Redstone family matters, but rather a leader with an independent voice.”

Redstone’s resignation at CBS came the day before today’s Viacom Board of Directors meeting.

CBS-Viacom-Redstone CBS
Chart via S&P Capital IQ

Moonves election isn’t taking anyone by surprise

“The elevation of Moonves is unsurprising considering his unique popularity within both the investment community and the industry,” wrote Brian Wieser, an analyst at Pivotal Research Group, in a letter to investors today. “We don’t think this should be viewed as causing any change for the company…Moonves was viewed as running the company (well) with a relatively free hand.”

Todd Juenger at Bernstein Research also supported the election of Moonves but was less positive about Viacom’s future “Regardless of who’s running the company, we don’t think anything can be done anymore to fend off inevitable decline of [Viacom’s] key businesses,” he wrote.

Following the announcement, shares of CBS rose 4.6% to $50.50 in after-hours trading Wednesday while shares of Viacom were up 11.6% to $49.85

CBS’ gains were given back last night but the company gained a bit on Thursday trading at $48.46. Viacom finished the day at $45.34.

But how much change is there really? The NYT notes:

Except for Sumner Redstone’s daughter, all Viacom board members voted to nominate Philippe Dauman as chairman.

Large shareholder, Mario Gabelli did not respond to a request for comment but tweeted the following.

Shari Redstone issued the following statement on February 3: “As has been accurately reported, my father’s Trust states his intention that I succeed him as (non-executive) Chair at CBS and Viacom, and also names
me as a Trustee after his death. However, it is my firm belief that whoever may succeed my father as Chair at each company should be someone who is not a Trustee of my father’s trust or otherwise intertwined in Redstone
family matters, but rather a leader with an independent voice. I was honored to nominate Les as the CBS Chair and am delighted to congratulate him on his new position. He follows in the visionary tradition of my father, and I know that Les will successfully lead CBS into the digital
future.”

Analysts react

JPMorgan opines:

We continue to believe there are three potential positive catalysts including 1) the notable improvement in ratings since August 2015, which has gone largely unnoticed in our view, which not only counters the thesis that viewership of Viacom’s networks has largely migrated to other platforms but importantly should translate in better advertising revenues in the quarters ahead and is likely to continue driven by more original programming, better measurement (Nielsen’s move to NPX and TAM), and ongoing easing comparisons; 2) press reports and speculation around Chairman Sumner Redstone’s health and activist investors with any incremental news on these fronts potentially presenting more optionality for strategic change, suggesting upside to the stock; and 3) potential upcoming DISH renewal, which will provide more visibility in the affiliate fee stream.

Wedbush

With Sumner Redstone having resigned as Chairman of CBS, the VIAB board will meet Thursday. Given CBS’s election of CEO Les Moonves as Chairman of CBS, it is reasonable to expect the board to choose a successor as Chairman of VIAB. Although the situation sparks renewed focus on a change in corporate mgt/control, we are cautious about any such change as a catalyst for VIAB shares.

Nomura

The situation at Viacom is less clear, given reports that Shari Redstone is unwilling to nominate a Trustee of her father’s trust for the Viacom chairmanship. As such, it appears unlikely that Philippe Dauman will succeed Sumner Redstone as Chairman. Further, we do note that a new Chairman could perhaps introduce more drastic changes at Viacom once elected, and that Mr. Dauman’s inclination to work under a Chairman other than Sumner Redstone is uncertain at best. What would we do with the stock? Given the looming overhang of the upcoming DISH negotiation along with what we believe to be lengthy turnaround projects at key networks MTV and Comedy Central, we believe fundamentals are less stable, and that VIAB is unlikely to attract a buyer at these levels. As such, we would remain on the sidelines here.