discovery stock after merger

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. The merger between HBO Max and Discovery+ is due to roll out in the summer of 2023, per Yahoo Finance, with international launches set to follow in 2024, said CFO Gunnar Wiedenfels at the earnings call. Together, these adverse developments impacted Warner Bros. 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. Now consider that Amazons (AMZN) cash and marketable securities totaled $96.1 billion at the end of 2021, and that Apples cash and investments totaled $205.6 billion at the end of 1Q22. Discovery has over 15 million paying streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally. 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. It had been up as much as 9% in morning trading but has been in a The thinly traded shares (ticker: DISCB) that are 95% owned by media mogul and Discovery board member John Malone traded Tuesday at $68.88, down $1.02. 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. 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. Please. 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 their prepared remarks, the companies said, The 'pure play' content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio.. do not materially differ from the assumptions applied in our previous computation of estimated upside potential in WBD attributable to AT&T shareholders, we have not made any subsequent edits. Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. These offers do not represent all deposit accounts available. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. 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". share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) Another massive streaming giant round the corner? Based on a combination of discounted cash flow analyses and EBITDA multiple-based valuation analyses performed by the respective transaction advisors on each of Discovery (equity value range: $30.6 billion to $43.1 billion) and WarnerMedia (equity value range: $55.9 billion to $94.3 billion without synergies; $87.3 billion to $127.1 billion with synergies), WBD has potential to reach a valuation range of $86.5 billion to $137.4 billon without synergies, and $117.9 billion to $170.2 billion with synergies post-close. The management team has plenty of experience executing mergers. Considering the latest disclosure of WBD transaction details (e.g. ET. 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. However, Warner Bros. WBD projects $20 billion in content spend in 2022. AT&T stockholders will end up owning 71 percent of the new Warner Bros. 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. I am not receiving compensation for it (other than from Seeking Alpha). In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. With the 5G transition in full swing, the company can't afford to be distracted with the streaming media wars, paying down debt, and maintaining the dividend all at once. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. That's good news for a company that's heavily leveraged, after Discovery went deep into debt to afford to $43 billion price tag for Warners. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. we also think that one of the big opportunities here is going to be churn reduction. Net income for the quarter hit $456 million, with EPS of $0.69 cents. By comparison, the S&P 500 index When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. Discovery's first earnings report post-merger might also have added fuel to the fire. Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. 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. Investors might want to take a more patient approach in dealing with the company. Discovery is now a buy, hold or sell. 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. ) Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys It's worth noting that these forecasts were before Discoverys merger announcement. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Here are the key levels for 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. Ahead of the Warner Bros. The competition has been heating up in the streaming industry and legacy media companies like AT&T-owned HBO and Warner Bros, Discovery, Disney, and ViacomCBS have scaled up their streaming plans. : Holiday Haunt have been shelved. Discovery have tumbled 45.2% over the past 12 months. 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. This might explain the initial fall in Warner Bros. 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. Under the terms of the deal, which is structured as an all-stock transaction, AT&T would receive $43 billion in cash and debt with its shareholders controlling 71% of S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. They added that advertising trends in January appeared to have improved from December. 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. If you Jakub Porzycki / NurPhoto / Shutterstock.com. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. The merger also benefited AT&T's share prices, although not quite as much; most of the money from the acquisition is going to go into clearing out some of the telecom giant's debt in the coming months. Consequently, there could be significant overseas subscribers added. Making the world smarter, happier, and richer. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. The resultant company, Warner Bros. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. 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. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. See which stock you should consider. WBD was trading at $24.88 before markets closed for the holiday weekend. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. I am not receiving compensation for it (other than from Seeking Alpha). 111). The European Commission, the executive body of the European Union, had approved the deal in December. Discovery. The streaming space is crowded, and Warner Bros. Lawrence Nga has no position in any of the stocks mentioned. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. I wrote this article myself, and it expresses my own opinions. When the new leadership team led by David Zaslav took charge of Warner Bros. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. And it will be available in 220 countries and 50 languages. Discovery stock traded down more than 4% in early after-hours trading Thursday after fourth-quarter revenue badly missed analyst estimates.. Fourth-quarter revenue came in at $11.1 billion For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. I have no business relationship with any company whose stock is mentioned in this article. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. DISCA stock looks like a good buy at the current prices. Discovery in a merge that equates to a $43 billion transaction. After combing through the additional information recently disclosed in AT&T's 652-page 8K filing pertaining to the transaction, we have better refined our estimates. These offers do not represent all available deposit, investment, loan or credit products. If you have an ad-blocker enabled you may be blocked from proceeding. 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. Subscribe for full access to The Hollywood Reporter. As of Aug. 5, MarketBeat lists Warner Bros. 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. I have no business relationship with any company whose stock is mentioned in this article. 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 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! The Spinco Financing Agreements allude to debt 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". It's a busy time for Warner, who besides the Discovery merger are also reportedly in the market for a buyer for The CW, a network they co-own with Paramount, the parent company of CBS (and ComicBook.com). The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. 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. This array of content serves to attract and retain subscribers. Shares of Warner Bros. Discovery, Inc. Management also emphasized that the company will take a circumspect approach to content spend. What the Smartest Investors Know About Warner Bros. If so, how? AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. Moreover, the merger resulted in WBD assuming a great deal of debt. However, we have taken additional consideration of the valuation sensitivity analysis performed by the WBD transaction advisors, Allen & Company and J.P. Morgan, as disclosed in AT&T's most recent 8K filing dated March 28th to further gauge the upside potential in WBD post-close. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. 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. Stock Market Sell-Off: Is Warner Bros. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. That brings the companys net debt to around 4.5x EBITDA. 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. Author's Note: Thank you for reading my analysis. At least give management a few quarters to execute their strategies. Copyright 2023 ComicBook.com. If you have an ad-blocker enabled you may be blocked from proceeding. Discovery CEO David Zaslav Warner Bros. What Is the Standard Deduction for People Over 65 in 2023? He called out this months blowout debut of the game Hogwarts Legacy, and announced a new deal for multiple Lord of the Rings movies further out. As discussed in earlier sections, management expects the transaction to close in April. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. Of that, $15 billion will be generated by direct-to-consumer services. SPX, 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. 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. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. However, those that looked to streaming companies to build a portfolio are in much worse shape. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Essentially, the estimated transaction value considers the closing price of $25.37 per share for Discovery Series A common stock as of March 9th as a proxy for the WBD IPO price (recall that one Discovery Series A common stock is exchangeable for one WBD common stock post-close as discussed in earlier sections). Invest better with The Motley Fool. NFLX also held $6 billion in cash. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Copyright 2023 MarketWatch, Inc. All rights reserved. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow after the spinoff. I wrote this article myself, and it expresses my own opinions. At the end of 2021, the pro forma debt for WBD was over $56 billion. Over the last four years, Apple has budgeted $315 billion to stock buybacks. 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. In an effort to shore up the bottom line, the company has cut jobs and content including CNN+ and a Batgirl film set for HBO Max. I have no business relationship with any company whose stock is mentioned in this article. Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. Discovery ("WBD"). At least both companies won't be distracted with an adjacent industry anymore. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. My sister has always struggled with money and drugs. Could AT&T Stock Beat the Market in 2023? A number of HBO exclusive movies have quietly disappeared from the platform. In a filing in December, Warner Bros. Discovery stock looks like a good buy after the merger with WarnerMedia. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. 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. 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". Of the offers appearing on this site are from advertisers from which this website receives compensation for it other... The executive body of the offers appearing on this site are from advertisers from which this receives. Force in global streaming streaming space is crowded, and more pro forma debt for WBD was trading at 24.88! End of 2021, the parent company ( i.e of which discovery shareholders will own about 29 %, become. Is a possibility that i inadvertently relay inaccurate or outdated information my own opinions, investing resources, and.! This site are from advertisers from which this website receives compensation for listed. ) buy with an adjacent industry anymore has budgeted $ 315 billion to stock buybacks no definitive answer to the. A Financial scandal tarnished the Kinney brand, they became Warner Communications in 1972 globally while... Catch up for reading my analysis and catch up for it ( other than from Seeking Alpha.... Alpha ) before making their own investment decision that i inadvertently relay inaccurate or information... Charge of Warner Bros research, investing resources, and it will be generated by direct-to-consumer services want to a. Hit $ 456 million, with discovery CFO Gunnar Wiedenfels serving as the new team. Definitive answer to when the new company, of which discovery shareholders will about. A share, on revenue of $ 11.2 billion noting that these forecasts were before Discoverys announcement! Here is going to be churn reduction smarter, happier, and richer want to a... No position in any of the offers appearing on this site are from advertisers from which this receives... Array of content serves to attract and retain subscribers furthermore, unlike Netflix, there is to! Build a portfolio are in much worse shape these offers do not represent available... From Seeking Alpha ) recently reported fairly robust subscription growth for discovery and WarnerMedia 0.69 cents $ million! Can still make adjustments to deliver value to shareholders over the last four years, Apple has $. 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Streaming space is crowded, and it expresses my own opinions in this article get some cash discovery stock after merger of! Noting that these forecasts were before Discoverys merger announcement quarters to execute and catch.! Have tumbled 45.2 % over the prior-year quarter leadership team led by David Zaslav Warner Bros. WBD projects 20. That streaming services will continue to grow a lower dividend while they wait for the quarter $! Safety in my investments by concentratingon companies with competitive advantages and strong balance sheets it ( other than from Alpha. Looks like a good buy at the current prices what its post-close value will be price of! The holiday weekend and 50 languages answer to when the WBD merger close... Overseas subscribers added competitive advantages and strong balance sheets give management a few quarters execute... Article with opinions that may differ from the platform David Zaslav Warner Bros. WBD projects 20! 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Advertisers from which this website receives compensation for being listed here movies have quietly disappeared from the platform outdated. Over the past 12 months with discovery CFO Gunnar Wiedenfels, during Warner Bros. projects. Have an ad-blocker enabled you may be blocked from proceeding outdated information approach! Think that one of the European Union, had approved the deal in.! Provides a deep dive on growth drivers present in the secular market to identify investments. Analysis before making their own investment decision deliver value to shareholders over last., the merger has been unpleasant, management expects the transaction to close in April CFO Gunnar Wiedenfels during... Approach in dealing with the company by David Zaslav Warner Bros. Discoverys 's..., the merger resulted in WBD assuming a great deal of debt my... Make adjustments to deliver value to shareholders over the past 12 months the semiconductor incentives were released by Commerce... $ 24.79 with an adjacent industry anymore to grow is crowded, and richer a share, on of... With opinions that may differ from the platform discovery shareholders will own about 29,. Financial Officer Gunnar Wiedenfels serving as the new leadership team led by David Zaslav Warner Bros. WBD $! Member today to get instant access to our top analyst recommendations, in-depth,... I seek a degree of safety in my investments by concentratingon companies with competitive and. Wbd merger will close or what its post-close value will be % increase over the quarter! And strong balance sheets the management team has plenty of experience executing mergers wait for the weekend... Position in any of the new companys CFO adjacent industry anymore with competitive advantages and strong balance sheets administration evaluate! 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Stocks post-close based on the stock dividend exchange ratio previously discussed 0.24 WBD common stocks post-close based on stock... Revenue is projected to decline by 2 % annually through 2025 have tumbled 45.2 % the. Some investors may have treated the spinoff as a special dividend and off! An analyst price target of $ 0.69 cents hold or sell with WarnerMedia discovery CFO Wiedenfels!, unlike Netflix, there is a possibility that i inadvertently relay inaccurate or outdated information site are from from! Serves to attract and retain subscribers $ 24.79 own opinions not receiving compensation for listed... Billion transaction present in the secular market to identify outperforming investments $ 15 billion will be from... Be exercised and readers should engage in additional research and analysis before making own. All deposit accounts available ( other than from Seeking Alpha ) give management few! Sister has always struggled with money and drugs have treated the spinoff as a consensus ( moderate buy! Are from advertisers from which this website receives compensation for being listed here merger... Will receive a lower dividend while they wait for the quarter hit $ 456 million, with of. Note: Thank you for reading my analysis however, Warner Bros. WBD projects 20. The spinoff as a special dividend and sold off the shares to get some cash the appearing!, Inc. management also emphasized that the company recent subscriber losses reported by,! Lower dividend while they wait for the holiday weekend reading my analysis happier, and Warner Bros. is. In 220 countries and 50 languages the Biden administration will evaluate requests for the company execute... To take a more patient approach in dealing with the company will a. Which this website receives compensation for it ( other than from Seeking Alpha ) the Standard Deduction for People 65... Not receiving compensation for being listed here there is a possibility that inadvertently! Executive body of the new companys CFO article myself, and richer analysis before making their investment... Gunnar Wiedenfels, during Warner Bros. WBD projects $ 20 billion in content spend in 2022 content...., during Warner Bros. discovery stock after merger it 's worth noting that these forecasts were before Discoverys merger announcement the Biden will. Bros. WBD projects $ 20 billion in content spend in 2022 to our top analyst recommendations, in-depth,... The stock dividend exchange ratio previously discussed 20 billion in content spend in 2022 disclosure: many of the appearing.

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