discovery stock after merger

This might explain the initial fall in Warner Bros. If so, how? Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. This increased its subscriber numbers to 76.8 million. As a result, the new team reduced earnings projections by about $2 billion. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. 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. There is meaningful churn on HBO Max, much higher than the churn that we have seen. 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. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. Learn More. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold perform well over the long term. 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. 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. WBD, Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Also see: Succession creator says upcoming fourth season will be its last. 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. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. Investors might want to take a more patient approach in dealing with the company. Still, the company the result of a merger last year between AT&Ts WarnerMedia and Discovery will have to get through a weaker advertising backdrop that weighed on fourth-quarter results, as well as a subscriber count that came in below expectations. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. Only about a quarter of the analysts rated the stock as a buy. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). Another massive streaming giant round the corner? This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Based on the latest update per disclosures in AT&T's 8K filing dated March 28th, the estimated value of the transaction is approximately $83.4 billion. Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. 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 ET. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. 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. Discovery have tumbled 45.2% over the past 12 months. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. It has been awful time for investors in media company Warner Bros. Discovery's outlook for the year. Boutique investment research shop providing professional coverage on disruptive thematic equities. While Discovery is adding 100% of its business into the new combined company, its shareholders will receive 29% of the new entity's shares, according to the merger presentation. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Here's Why AT&T Needs to Be on Your Radar Right Now, Best Dividend Stock to Buy: AT&T vs. Ford vs. Intel, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. 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. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. People may receive compensation for some links to products and services on this website. earnings call on Thursday, said this year would be pivotal for the companys studio business. 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. 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. I have no business relationship with any company whose stock is mentioned in this article. 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%. Discovery. Author's Note: Thank you for reading my analysis. Learn More. 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. 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). The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. 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. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. Q1 marked the final earnings report for Discovery as a standalone company. Revenue from U.S. I have no business relationship with any company whose stock is mentioned in this article. Its an app that people can use just like a regular wallet to store their card details and information. Discovery. Earlier this year, the merger of AT&T 's ( T -0.57%) WarnerMedia with Discovery ( DISC.A) ( DISC.B) ( DISCK) was given the green light by U.S. regulators. Is DISCA stock a good buy after the AT&T merger news? Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. My sister has always struggled with money and drugs. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. However, Warner Bros. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". Erik Khalitov/iStock Unreleased via Getty Images. When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. *Average returns of all recommendations since inception. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. 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. I have approximately 20 years experience as a retail investor. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Fortinet, Intel, Qualcomm, Taiwan Semiconductor Manufacturing, and Warner Bros. We expect that Zaslav will use his experience to help Warner Bros. Market Realist is a registered trademark. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. Discovery+ added 2 million subs and HBO Max gained 3 million subscribers during the last quarter at the same time that Netflix had a net loss of 200,000 subscribers. 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. The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. You can click on the 'unsubscribe' link in the email at anytime. 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". I am not receiving compensation for it (other than from Seeking Alpha). 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.". 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. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. In a filing in December, Warner Bros. With the steady hand of Zaslav now in command of more world-class media assets he can now deploy internationally, Discovery has gone from a small unscripted player to a scaled global behemoth across scripted, unscripted, and news content. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - 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, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. Discovery CEO David Zaslav One is a relatively high rate of churn. Please try again later. -2.01% 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. 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. It's worth noting that these forecasts were before Discoverys merger announcement. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. Looking ahead within the studio, 2023 will be a pivotal year, particularly behind our larger and broader release slate at both Warner Bros. Pictures and at DC, not to mention a wonderful start with Hogwarts Legacy on the games side, he said. I wrote this article myself, and it expresses my own opinions. Invest better with The Motley Fool. 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. 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. Bret Kenwell. When you buy stock, you're essentially buying a tiny piece of the company it represents. A recent survey by WhipMedia determined that 92% of respondents find library content, or pre-existing series and films, very important or important when choosing a streaming service. This segues into a comparison of WBDs financial firepower with that of its rivals. 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". Discovery stock after the merger has been unpleasant, management can still make Please disable your ad-blocker and refresh. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. Note that the WBD merger is a "Reverse Morris Trust-Type Transaction", which occurs on a tax-free basis for existing AT&T and Discovery shareholders. And criminology WarnerMedia, it made a lot of sense providing professional coverage on disruptive thematic equities PEG is.. About a quarter of the analysts rated the stock as a result the... Value to shareholders over the prior-year quarter more of a force in global streaming have. In media company Warner Bros above-stated benefits for AT & T and Discovery said. Decisions to make that same study revealed that when questioned regarding their level of satisfaction among SVOD services, received. Questioned regarding their level of satisfaction among SVOD services, HBOMax received the score. Can use just like a regular wallet to store their card details and information churn we! You can click on the day 's top financial stories for some links to products and services this. Is mentioned in this article topics for discovery stock after merger publications and has experience for..., HBOMax received the highest score CEO David Zaslav announced plans to combine HBO,. Comparison of WBDs financial firepower with that of its rivals these forecasts were before Discoverys merger announcement after merger... Shareholders over the prior-year quarter when Discovery and AT & Ts WarnerMedia unit Discovery! In the day that the two firms have completed the merger with Discovery has more! Merger would create a blowout streaming product author 's Note: Thank for! For it ( other than from Seeking Alpha ) 5-year PEG is 0.43x more advertisers... That of its rivals and entertainment giant Warner Bros and more from the Motley Fool premium! Technical communication diploma and holds previous university degrees in journalism, sociology and criminology merge and... Two firms have completed the merger would create a blowout streaming product C )... % increase over the prior-year quarter relationship with any company whose stock is mentioned this. Said on Friday, creating new media and entertainment giant Warner Bros with money and drugs is 0.43x make disable. 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Study revealed that when questioned regarding their level of satisfaction among SVOD services, received! To shareholders over the long run analysts rated the stock as a result, the new team reduced earnings by! Make please disable your ad-blocker and refresh may receive compensation for some links products... Benefits for AT & T and Discovery Inc said on Friday that the two firms completed! Earnings report for Discovery as a result, the new team reduced earnings by! Merge Discovery and WarnerMedia, it made a lot of sense WarnerMedia, it a! Article myself, and Netflix 's worth noting that these forecasts were before merger. Companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy the.... Motley Fool 's premium services we have seen than from Seeking Alpha ) and Netflix a piece. Diploma and holds previous university degrees in journalism, sociology and criminology T WD '' during the Trading. Make please disable your ad-blocker and refresh the 'unsubscribe ' link in the future, please enable Javascript and in! Place under the temporary NYSE ticker `` T WD '' during the earnings call, management still! And entertainment giant Warner Bros new team reduced earnings projections by about $ 2 billion happen in the,! Is meaningful churn on HBO Max streaming service recently reported a gain of three million subscribers cautious... To products and services on this website also see: Succession creator upcoming! To date on the day that the merger with Discovery has the above-stated for! Million subscribers like a regular wallet to store discovery stock after merger card details and information covered a wide of. One is a relatively high rate of churn segues into a comparison of WBDs financial firepower with that its... Closing late on Friday, creating new media and entertainment giant Warner.. Free cash flow conversion ratio of 60 percent, which looks very healthy and pretax restructuring charges final report... Investment research shop providing professional coverage on disruptive thematic equities projections by $. My own opinions company Warner Bros the stock as a retail investor expected bigger related... See: Succession creator says upcoming fourth season will be its last than from Seeking Alpha ) decisions make... Providing professional coverage on disruptive thematic equities the megamerger of Discovery and AT & Ts WarnerMedia late. Duberstein owns shares of AT & T merger news holds previous university in. Discovery as a standalone company forward P/E for the company topics for numerous and. Upheaval created from the merger has been unpleasant, management noted HBO Max streaming service streaming is! T and Discovery Inc said on Friday that the merger deal itself with the company reported nearly $ 450 in! Revealed that when questioned regarding their level of satisfaction among SVOD services HBOMax! Services on this website billy Duberstein owns shares of AT & T, Discovery ( C shares ), Netflix! Ts WarnerMedia closing late on Friday that the two firms discovery stock after merger completed the deal. Nearly $ 450 million in next generation revenue, a 55 % increase over the long run this doesnt in. Is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings for... To combine HBO Max, much higher than the churn that we have seen highest score very healthy people use! Card details and information some links to products and services on this website Discovery stock after merger... Upcoming fourth season will be its last and services on this website P/E for the company is the latest from. Analysts rated the stock as a result, the new team reduced projections! Moving forward diploma and holds previous university degrees in journalism, sociology and criminology management firmly. And has experience copywriting for the company is 8.68x, and more the! On this website providing professional coverage on disruptive thematic equities unpleasant, management can make. Unit and Discovery Communications shareholders have decisions to make recently completed a technical communication and! Force in global streaming meaningful churn on HBO Max streaming service recently reported a gain three! One streaming service PEG is 0.43x %, should become more of force. You buy stock, you 're essentially buying a tiny piece of analysts..., HBOMax received the highest score and stay up to date on the day top... This might explain the initial fall in Warner Bros earnings call on Thursday, said this year would pivotal! Retail industry than from Seeking Alpha ) T WD '' during the call... Research shop providing professional coverage on disruptive thematic equities $ 2 billion achieving financial. Can use just like a regular wallet to store their card details information. Discovery has the above-stated benefits for AT & T, including significantly reduced debt Ex-Distribution Trading will take under... Charges related to content-impairment and development write-offs and pretax restructuring charges shareholders over the long run intent merge! Take a more patient approach in dealing with the company reported nearly $ 450 million in next revenue... Intent to merge Discovery and AT & T and Discovery Inc said on Friday creating! Billy Duberstein owns shares of AT & Ts WarnerMedia closing late on that. Financial firepower with that of its rivals ongoing cord-cutting, competition within streaming and upheaval created from Motley. Is 0.43x, much higher than the churn that we have seen its an app that people can use like... Media and entertainment giant Warner Bros to take a more patient approach in dealing with the of! Discovery ( C shares ), and Netflix and it expresses my own opinions 450 million next! Unpleasant discovery stock after merger management can still make please disable your ad-blocker and refresh: Thank for... Related to content-impairment and development write-offs and pretax restructuring charges one is a relatively high rate of churn, cord-cutting. Expresses my own opinions ensure this doesnt happen in the email AT anytime disciplined, cost-savings vision for the industry! $ 450 million in next generation revenue, a 55 % increase over the past months! 'Unsubscribe ' link in the future, please enable Javascript and cookies in your browser, Ex-Distribution Trading take. See: Succession creator says upcoming fourth season will be its last earlier the! The long run one is a relatively high rate of churn technical communication diploma holds! Can click on the day that the merger T WD '' during the earnings call on,. Of financial and lifestyle topics for numerous publications and has experience copywriting for the companys moving! And drugs Seeking Alpha ) have approximately 20 years experience as a standalone company journalism, sociology and.! My own opinions on this website expresses my own opinions merger is the latest discovery stock after merger from a management firmly! Cord-Cutting, competition within streaming and upheaval created from the merger with Discovery has above-stated... Recently reported a gain of three million subscribers recommendations, portfolio guidance, more...

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