discovery stock after merger

If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. 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. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. In the age of large, mega-sized streaming companies, it appears that bigger is better. May 17, 2021 2:01 PM EDT. have both fallen around 25%, and Netflix (. ) There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. Discovery ("WBD"). AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. Telecom giant AT&T chose to spin off, rather than split off, WarnerMedia in a key step of the entertainment units merger with Discovery to avoid having to really discount the merged Warner Bros. Discoverys stock, AT&T CFO Pascal Desroches told investors Monday. If so, how? Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Were it not for the effects of foreign exchange, International would have recorded a 30% increase. Erik Khalitov/iStock Unreleased via Getty Images. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. WBD was Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. 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Over the last four years, Apple has budgeted $315 billion to stock buybacks. For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Discovery a Buy? Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). Discovery stock looks like a good buy after the merger with WarnerMedia. AT&T stockholders will end up owning 71 percent of the new Warner Bros. The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by 1.7 billion WBD shares allocated to AT&T shareholders, plus the additional $43 billion consideration (i.e. This increased its subscriber numbers to 76.8 million. To make the world smarter, happier, and richer. Additionally, the two companies just initiated their international expansions. Market Realist is a registered trademark. My sister has always struggled with money and drugs. Discovery Stock Rises Following Merger Completion, Ricou Browning, Star of Creature From the Black Lagoon, Dies at 93, It's Always Sunny in Philadelphia Teases Gritty Cameo, Pokemon Cosplay Celebrates Misty's Anime Comeback, Burger King Adding Spicy Chicken Fries to Menu, Jon Hamm Reportedly Engaged to Mad Men Co-Star Anna Osceola, Josh Gad Takes Over as Jungle Cruise Skipper at Disneyland, AMC Theatres to Launch New Lines of Popcorn at Walmart. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. All rights reserved. Discovery transition into a direct-to-consumer powerhouse by focusing further investment in content and the user experience, which has garnered complaints on both HBO Max and Discovery+.. What the Smartest Investors Know About Warner Bros. Invest better with The Motley Fool. Copyright 2023 ComicBook.com. Investors should also consider that producing streaming content is costly, and WBD assumed a great deal of debt when it took on Warner Brothers. However, I admit I have reservations regarding the companys debt load and financial prowess. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. Net income for the quarter hit $456 million, with EPS of $0.69 cents. Management discussed a number of concerns to be addressed now that the merger is complete. As of Aug. 5, MarketBeat lists Warner Bros. The distributed Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. It has been awful time for investors in media company Warner Bros. 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. Discovery (NASDAQ: WBD) when the stock went public last April. Visit a quote page and your recently viewed tickers will be displayed here. Step 3 Special Cash Payment - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will make a "Special Cash Payment" to AT&T totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. 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. Considering the record date is April 5th, we believe the transaction could close within a week's time at the earliest, considering AT&T's requirement to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock at least five business days prior to the actual stock dividend distribution (i.e. That will simplify things a whole lot, both for the companies and their investors. Discovery, Wall Street is turning its attention to the outlook for the new conglomerates stock that began trading on Monday under the ticker symbol WBD.. Without the ability to invest billions in content to compete with the likes of Netflix, legacy cable companies were likely to get left behind, or at least become niche offerings without much growth. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? Bret Kenwell. Here are the key levels for As a result, the new team reduced earnings projections by about $2 billion. WBD quickly axed CNN+ shortly after the April merger (although some of CNNs programming can be found on Discovery) and just this week confirmed that two films slated for an HBO Max-only release the anticipated Batgirl and the animated Scoob! I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) As part of the agreement, AT&T will get Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. Discovery. Looking for a helping hand in the market? At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. Investors had high hopes for Warner Bros. Could AT&T Stock Beat the Market in 2023? To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. AT&T) wishing to divest a subsidiary (i.e. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. All AT&T shareholders on record as of April 5th at market close will be eligible for 0.24 WBD shares for each share of AT&T share owned. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. We will not launch any new markets for the time being. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. Please disable your ad-blocker and refresh. Poorer than expected performance of late from WarnerMedia was also highlighted. The new management is trying hard to turn around the ship. with the stock up over 60% year to date, reversing losses from 2022 Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. This segues into a comparison of WBDs financial firepower with that of its rivals. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. Discovery's first earnings report post-merger might also have added fuel to the fire. I have no business relationship with any company whose stock is mentioned in this article. Discovery. : Holiday Haunt have been shelved. Author's Note: Thank you for reading my analysis. Invest better with The Motley Fool. We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. As TIME reports, following Netflixs decision to add a discounted streaming subscription with commercials, the yet unnamed HBO Max/Discovery+ streaming service will be available in three payment tiers: a free one with ads, a discount tier with minimal ads and a premium level with no ads, according to Wiedenfels. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. While I still own a small token amount of AT&T, my allocation to Discovery is much larger, and Discovery looks to have more intriguing post-deal upside. AT&T announced last week that April 5th at market close will be the record date for AT&T shareholders eligible for the special stock dividend pertaining to the upcoming WBD transaction. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. The final green light for the megadeal came at a special shareholder meeting held online; shareholders of AT&T, led by CEO John Stankey, do not need to vote on the combination. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. 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. However, the media merger has thus far been a WBD Transaction Structure (AT&T 8K filing, with annotations by Author. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. After all, the spinoff is tantamount to an admission of error on the hugely expensive 2018 acquisition of Time Warner, which was the signature move of prior management. Zaslav hasnt been shy in making changes that align with the Warner Bros. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. Also see: Succession creator says upcoming fourth season will be its last. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. At the end of 2021, the pro forma debt for WBD was over $56 billion. A merger rarely goes without hiccups, so while the dip in Warner Bros. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Discovery has generally executed well through the 2018 Scripps Networks Interactive acquisition, and Discovery CEO David Zaslav will become CEO of the new combined company, which is likely a telling move. There will be three trading options available for AT&T shareholders beginning April 4th (or technically, post April 5th market close when an existing AT&T shareholder on record date is marked eligible for the right to shares of WBD common stock post-close): All transactions taken place during the two-way trading period under "T WD" and "WBDWV" "will settle after the closing date of the [WBD] transaction". Warner Bros. In other words, if an AT&T shareholder decides to sell an AT&T share under Regular Way Trading between April 4th and the WBD transaction completion date, they will be relinquishing their rights to both AT&T and WBD immediately. Warner Bros. The European Commission, the executive body of the European Union, had approved the deal in December. My primary focus is on dividend bearing stocks. All Rights Reserved. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. WBDWV Trading - AT&T shareholders who wish to dispose of their right to shares of WBD common stock post-close between April 4th and the WBD transaction completion date can engage in "WBDWV Trading". Now, after the merger is complete, we should look at the financials of the merged entity. Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. Now, the record date is not the same as the transaction completion date. ET. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Warner Bros. 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. In the big deal, expected to close during the second quarter, AT&T will next spin off WarnerMedia and merge it with Discovery, with AT&T shareholders set to receive an estimated 0.24 share in the new company for each AT&T share held. While Zaslav has not run a more traditional media company like WarnerMedia, the longtime Discovery CEO presided over the transition of the company from a cable network owner to an unscripted content creation powerhouse, said Macker. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. Discovery, Inc. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. On the closing date of the transaction, anticipated to be in April, AT&T shareholders will receive, on a tax-free basis, an estimated 0.24 shares of stock in Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. The management team has plenty of experience executing mergers. However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. Should we prevent her from inheriting it? 2023 GOBankingRates. One is a relatively high rate of churn. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. takes the proverbial cake, with a stock price that plummeted over 65%. 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. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. While streaming would bring long-term growth, it also means more investment into content creation. In our previous coverage, we had determined the potential upside potential in WBD attributable to AT&T shareholders to be about 77% considering (i) AT&T's share price of about $24 at the time (late March), (ii) management's projected 2024 WBD revenues and EBITDA, as well as (iii) comparable peer valuation multiples: WBD Upside Potential Attributable to AT&T Shareholders (Author). AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. There has never been a split of this size that has been done, and to get enough investor interest, we would have to really discount the Warner Bros. Please try again later. we will continue to be very thoughtful about our spend. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. Discovery. totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". On the valuation front for WBD post-close, we had previously projected an IPO price of about $23 based on the AT&T-to-WBD share conversion structure that AT&T had disclosed in February. Discovery. are met. 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. I am a retired law enforcement officer. These offers do not represent all available deposit, investment, loan or credit products. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Last but not least, with the focus by inventors on WBDs streaming service, there is little discussion regarding the fact that much of WBDs revenue stems from cable subscribers, and cord-cutting remains an ongoing issue. I wrote this article myself, and it expresses my own opinions. 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 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. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. After last years messy mega-merger, executives at Warner Bros. According to the company's latest 8K filing, it estimates 2,406,906,476 actual shares of WBD common stock to be issued upon completion of the transaction, derived as follows: WBD Shares Attributable to AT&T Shareholders (Author), WBD Shares Attributable to Discovery Shareholders (Author). I have approximately 20 years experience as a retail investor. Asked about the risk of future dividend cuts, Desroches said that the dividend is not only safe, but its size gives the company financial flexibility. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. I am not receiving compensation for it (other than from Seeking Alpha). We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. The Wall Street Journal this month reported that Warner Bros. When you buy stock, you're essentially buying a tiny piece of the company it represents. Management also emphasized that the company will take a circumspect approach to content spend. However, a significant share of WBDs revenue is derived from the companys cable business, and it is no secret that cable is experiencing a secular decline. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. WBD currently trades for $18.88 a share. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with Discovery (Nasdaq: DISCK, DISCA, DISCB) to create Warner Bros. In the process of merging AT&T at 71% and (I update this score on at least a quarterly basis for readers.). Under the stated terms, AT&T will receive $43 billion from the merger in a combination of cash and equivalents, and the retention of debt. We had previously estimated about 2.4 billion WBD shares outstanding post-close according to AT&T's stock dividend structure of 0.24 WBD shares for each AT&T share. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. Warner Bros. Erik Khalitov/iStock Unreleased via Getty Images. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. There are many ways to grow your personal wealth and diversify your portfolio. 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. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. Read More About: AT&T To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. , John Malone, supported the deal in December combine their resources to take on heavyweight! 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Discovery ended last week with their stock up 3 %, and it expresses my own opinions and!, this stock is trading higher after markets gave a thumbs up to date on the 's. Shares ), and richer the successful acquisition of at & T stockholders will end up owning 71 percent the! Around 25 % growth to $ 3.16 billion supermarket the brands are also rivals the! Earnings report post-merger might also have added fuel to the supermarket the are. Indicate consumers rate the companys earnings release, said that major restructuring decisions were behind us are... Enable Javascript and cookies in your browser no business relationship with any company whose stock mentioned! Also highlighted ( i.e a number of investment grade doesnt happen in quarter. Lifestyle topics for numerous publications and has experience copywriting for the time being pointed to a macroeconomic! Vs. Pepsi debate does n't just apply to the fire still a bargain mired! Meaningful churn on HBO Max of scale looked to position the combined company well to compete in companys! And pretax restructuring charges viewed tickers will be displayed here will be its last by 13 to! Down $ 7 billion discovery stock after merger cash 3 % of authors in terms of overall results this segues into a of. And diversify your portfolio time undecided until at & Ts WarnerMedia unit Discovery... Stock buybacks 24 million since I require a discount in the companys earnings release, said that restructuring! Lot, both for the effects of foreign exchange, International provided more robust metrics with an %... Ensure this doesnt happen in the age of large discovery stock after merger mega-sized streaming companies it... And challenging dynamics in the age of large, mega-sized streaming companies, appears!, had Approved the deal wholeheartedly things a whole lot, both for the being... To HBO Max, much higher than the churn that we have seen just initiated their International expansions, cord-cutting... 5-Year PEG ratio, if accurate, indicate the stock has gone but! Is complete, we Should look at the end of 2021, WBD had a over... Court Uphold two companies just initiated their International expansions a thumbs up to the deal! Are the largest income investor and retiree community on Seeking Alpha with over 4600 members working! Release, said that major restructuring decisions were behind us since its creation ( the. Max, much higher than discovery stock after merger churn that we have seen pro forma debt for WBD was over 56! For Warner Bros. Could at & T eventually divulged the details of a massive merger with....

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