If you have an ad-blocker enabled you may be blocked from proceeding. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Chief Executive David Zaslav said the company which oversees TV channels and streaming platforms like HBO, HBO Max, Discovery and Discovery+, DC Comics and some videogames would more than double the output from its studio segment this year. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. Investors will learn more in the coming quarters about how things are working out. pertaining to the WarnerMedia spinoff, the telecom giant also submitted a, 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. ) I am a retail investor, with no formal training in investing. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. Consequently, I rate WBD as a HOLD. 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. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. His clients may own shares of the companies mentioned. 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. That brings the companys net debt to around 4.5x EBITDA. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. -0.30% However, Warner Bros. Understanding how you are investing is just as important as what you are investing in. 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. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. WarnerMedias operating income declined 35% year-over-year. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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. I wrote this article myself, and it expresses my own opinions. Warner Bros. If you have an ad-blocker enabled you may be blocked from proceeding. Revenue from U.S. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Stock Market Holidays 2023: Is the Stock Market Open Today? Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. Sign up for THR news straight to your inbox every day. 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. We expect that Zaslav will use his experience to help Warner Bros. 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.. A number of HBO exclusive movies have quietly disappeared from the platform. Discovery ("WBD"). 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. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Warner bros bring sold to Discovery? Additional disclosure: I have no formal training in investing. Looking for a helping hand in the market? If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. WBD, Discovery's first earnings report post-merger might also have added fuel to the fire. 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). 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. 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. Discovery may need to fund losses for many years to build a sizable customer base. 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. Cost basis and return based on previous market day close. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Poorer than expected performance of late from WarnerMedia was also highlighted. 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. Discovery have tumbled 45.2% over the past 12 months. Discovery was word that DC could be restructured. 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. WBD projects $20 billion in content spend in 2022. The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. Step 7 The Merger - Once transaction steps #1-7 are complete, Discovery's Drake Subsidiary, Inc. merger subsidiary will merge into Magallanes, Inc. Spinco, with the Spinco being the surviving "wholly owned subsidiary of WBD". Unsurprisingly, some of the remaining shareholders -- those who held onto the shares after the initial post-merger drop off -- might have been upset by these adverse developments and joined the selling rally. Discovery. We finally have the public debut today on the NASDAQ for the newly formed Warner Brothers Discovery that's going to be the new joint venture, the new streaming behemoth in the landscape. Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. 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. While it was a nice niche player before, I think the growth possibilities for the new company are much bigger than they would have been for Discovery alone. On a GAAP basis, analysts polled by FactSet expected Warner Bros. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Together, these adverse developments impacted Warner Bros. Lawrence Nga has no position in any of the stocks mentioned. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. If you have taken a look at AT&T's latest 8K filling dated March 28th, you would notice that the filing registrant is "Magallanes, Inc.". 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! These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. And it will be available in 220 countries and 50 languages. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. 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. Under the terms of the deal, WarnerMedia retained $43 billion in debt. Discovery strategic shift. The new company will be able to compete in the streaming industry. Overall, the company revised adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $9 billion and $9.5 billion for 2022, down from the $10 billion forecast before the merger. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. If so, how? Discovery (WBD -2.01%). Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. WBD was trading at $24.88 before markets closed for the holiday weekend. The streaming space is crowded, and Warner Bros. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. to the transaction, we have better refined our estimates. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. 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. 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. Step 4 Issuance of Spinco Common Stock - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date, the Magallanes, Inc. Spinco will issue to AT&T a number of shares equivalent to total AT&T shares outstanding, which will later be "exchanged for shares of WBD common stock to be issued to [Spinco shareholders]". -2.01% Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. Warner Bros. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. 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