Investor Jitters Sink Viacom’s Stock Further

The price of Viacom International shares dropped for a second consecutive day Tuesday, down $2.50 to $65.50, apparently due to investor concerns over Viacom’s next move to rebuff an unwelcome investor.

The stock has tumbled $6.50 a share since Friday’s closing, when Wall Street sources said that New York financier Carl C. Icahn had accumulated about 17% of Viacom, a broadcasting and cable-TV concern.

The Wall Street Journal reported Tuesday that Viacom was “trying to enlist” Hallmark Cards as a friendly investor, possibly with an offer to issue preferred stock or warrants to the Kansas City, Mo.-based company. Such a move would presumably dilute the private market value of common shares owned by other investors.

However, one investment community source told The Times that Hallmark and Viacom reached an impasse in negotiations last Sunday.

By Monday, according to another source, Viacom was searching for a sizable acquisition. The source said that his company was approached to determine whether it would be willing to sell one of its businesses to Viacom. (The company declined.)

Viacom spokesman David Fluhrer declined to comment on either report.

At Hallmark, spokesman Charles Hucker said the greeting card manufacturer “is not negotiating at this time with Viacom or any other party for a position in Viacom.” He declined to say whether talks occurred over the weekend.

Despite Wall Street’s certainty that Icahn is now Viacom’s largest shareholder, the investor has not confirmed any purchases publicly. Under federal securities law, an investor must notify the Securities and Exchange Commission of any stake exceeding 5% within 10 calendar days, identifying his source of funds and the purpose of the acquisition, among other things.

Question of Funds

The two-day decline in Viacom’s stock price may also indicate that some speculators doubt that Icahn can raise sufficient money to mount a takeover bid. He recently acquired Trans World Airlines.

Sources said that despite Viacom’s anxiety, the company is not yet willing to consider a friendly merger with another large company to block Icahn.

“They are not psychologically there yet because Icahn hasn’t even filed yet,” one investment community source said. “I think it will take another shoe (dropping).”

When asked what kind of “shoe,” the executive replied, “A bid from Icahn.”