Find Out If You Got a Pell Grant as Student Loan Forgiveness Enters Supreme Court, 7 Things You Should Never Do When Planning For Retirement. Let the power of quality research drive your investment convictions. The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. It had been up as much as 9% in morning trading but has been in a At least both companies won't be distracted with an adjacent industry anymore. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. Readers should consider this when weighing my buy/hold/sell recommendations. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. In our last coverage on the upcoming WBD transaction and its implications for AT&T post-close, we had provided a detailed estimate on WBD's upside potential attributable to AT&T shareholders post-close. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. And as I'm looking under the hood here again, CNN+ is just one example, and I don't want to go through sort of a list of specific examples, but there's a lot of chunky investments that are lacking what I would view as a solid analytical, financial foundation and meeting the ROI hurdles that I would like to see for major investments. In fact, Amazon is the sole company with a share price gain over that time frame, and it lags the S&P by more than 15%. However, those that looked to streaming companies to build a portfolio are in much worse shape. Discovery may need to fund losses for many years to build a sizable customer base. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. By Russ Burlingame This increased its subscriber numbers to 76.8 million. Magallane, Inc. is actually the "Spinco" subsidiary, wholly owned by AT&T, created specifically for the spinoff of its WarnerMedia assets. When you buy stock, you're essentially buying a tiny piece of the company it represents. Maximize your income with the worlds highest-quality dividend investments. After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. Warner Bros. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Considering the latest disclosure of WBD transaction details (e.g. Disclosure: I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Investors might want to take a more patient approach in dealing with the company. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Warner Bros. We will not sort of chase aggressively behind subscriber growth. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. ET. David Nadelle is a freelance editor and writer based in Ottawa, Canada. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. If you have an ad-blocker enabled you may be blocked from proceeding. Another massive streaming giant round the corner? Zaslav hasnt been shy in making changes that align with the Warner Bros. The companies are also forecasting annual cost synergies of $3 billion. WBD was trading at $24.88 before markets closed for the holiday weekend. Learn More. Ahead of the Warner Bros. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. Sign up for THR news straight to your inbox every day. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. The new company will be able to compete in the streaming industry. Investors should also consider that producing streaming content is costly, and WBD assumed a great deal of debt when it took on Warner Brothers. AT&T has applied an exchange ratio of 2.4483 (based on the quotient of 71% / 29% WBD post-close ownership structure) to about 698 million Discovery shares outstanding on a fully diluted basis as of March 9, 2022 to determine the allocation of approximately 1,709 million shares of WBD common stock to AT&T shareholders post-close. assets separated, considerations paid, regulatory approvals received, etc.) The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. ET. You can click on the 'unsubscribe' link in the email at anytime. What's been going on and is now the time to sell out of the stock? Now that the close of the WarnerMedia deal is approaching, we are near the starting line of a new era for AT&T, said Stankey on Friday. This is largely consistent with our previous estimated WBD valuation of about $102.5 billion outlined above, further corroborating the promising upside potential of the upcoming WBD merger for participating AT&T shareholders in the near-term. Copyright 2023 ComicBook.com. Invest better with The Motley Fool. In 1989, Warner merged with Time Inc., publishers of Time and Life magazines, who were almost immediately forced to buy Warner Bros. after a hostile takeover attempt by Paramount (who, funny enough, wanted Time, not Warner). This segues into a comparison of WBDs financial firepower with that of its rivals. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. I am not receiving compensation for it (other than from Seeking Alpha). Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. In 2000, internet service provider America Online bought Time-Warner, Inc. to form AOL Time Warner, but when the dot-com bubble burst, that partnership dissolved quickly. Discovery, Inc. Here are the key levels for Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Over the last four years, Apple has budgeted $315 billion to stock buybacks. A merger rarely goes without hiccups, so while the dip in Warner Bros. Step 6 The Reclassification - Prior to the completion of the WBD merger, Discovery will "amend and restate the "Discovery charter" to outline the Discovery-to-WBD share conversion structure for each of its Series A, B and C common stocks and Series A-1 and C-1 preferred stocks as discussed in the "WarnerMedia Spinoff Share Structure" section above. In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. Discovery. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. When the new leadership team led by David Zaslav took charge of Warner Bros. Is This the Best Streaming Stock for 2023? Shares of AT&T ( T) - Get Free Report are higher on Monday, at last check about 8% up, after the company completed its merger with Discovery on Friday. Discovery's outlook for the year. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. This array of content serves to attract and retain subscribers. Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. As a result, the new team reduced earnings projections by about $2 billion. That, plus the lower dividend, will allow AT&T to focus on building out its 5G network and its fiber footprint over the next few years. We currently are holding a limited-time sale with 10% off your first year! Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. I wrote this article myself, and it expresses my own opinions. The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. The idea is that Warners has not been fully capitalizing on the brand's potential. WBD Transaction Structure (AT&T 8K filing, with annotations by Author. I am not receiving compensation for it (other than from Seeking Alpha). Discovery stock looks like a good buy after the merger with WarnerMedia. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. Discovery ("WBD"). These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Management discussed a number of concerns to be addressed now that the merger is complete. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Invest better with The Motley Fool. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. Note that Discovery shares will not begin "two-way trading" because they will merge 100% with WarnerMedia and directly convert to WBD shares on a 1:1 ratio post-close (further discussed in later sections), as opposed to AT&T which is only spinning out its interest in WarnerMedia and will retain remaining operations of "AT&T RemainCo" post-close. Discovery ("WBD"). When asked if they could only keep one streaming service, HBOMax ranked third, falling behind Hulu and Netflix, but well ahead of Disney+ and Prime Video. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. The Hollywood Reporter is a part of Penske Media Corporation. Madonna Breaks Silence on Death of Brother Anthony Ciccone: You Planted Many Important Seeds, Paramount CFO: Streaming Content Spending Could Come in Below $6B Target In 2024, BBC Journalism Union Members Vote in Favor of Strike. distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Discovery is now a buy, hold or sell. Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. 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