discovery stock after merger

discovery stock after merger

Discovery has over 15 million paying streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. The Wall Street Journal this month reported that Warner Bros. Subscribe for full access to The Hollywood Reporter. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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). In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. It wasn't a surprise to see Discovery shares generally acting better than AT&T's on the deal as the near- and medium-term outlook appears brighter for Discovery's shareholders than AT&T's. Bret Kenwell. - April 18, 2022 08:39 am EDT. This might explain the initial fall in Warner Bros. 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. 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. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Of that, $15 billion will be generated by direct-to-consumer services. 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. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. 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. Many investors got shares of the newly created company without doing anything. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. At least give management a few quarters to execute their strategies. 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. After all, there has been a more chaotic revolving door over in the HBO C-suite since the merger with AT&T, with lots of turnover and restructuring. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing I have no business relationship with any company whose stock is mentioned in this article. Discovery (NASDAQ: WBD) when the stock went public last April. Discovery, Inc. 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. These offers do not represent all deposit accounts available. to create Warner Bros. That will simplify things a whole lot, both for the companies and their investors. 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 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+.. Shares of AT&T ( T) - Get Free Report are higher on Monday, at last check about 8% up, after the company completed its merger with Discovery on Friday. Warner Bros. To make the world smarter, happier, and richer. share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. As of Aug. 5, MarketBeat lists Warner Bros. The Motley Fool recommends Warner Bros. Step 2 Issuance of Spinco Debt Securities - 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 issue debt securities ("Spinco Debt Securities") to AT&T and distribute all or some of the cash proceeds received from borrowings by Spinco under the "Spinco Financing Agreements" to represent its purchase of WarnerMedia assets and liabilities from AT&T. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. Discovery. Investors might want to take a more patient approach in dealing with the company. 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. Under WBDWV Trading, AT&T shareholders will be able to sell their right to WBD shares distributed to them as a result of their AT&T share ownership as of the record date through the temporary Nasdaq ticker "WBDWV" beginning April 4th. Erik Khalitov/iStock Unreleased via Getty Images. The executive also told the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Florida, that AT&Ts stock should be appealing to investors after the WarnerMedia deal as the company is paying dividends, targeting earnings growth and is attractively priced. Offers may be subject to change without notice. has fallen 5.8% over that period. 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). Warner Bros. They expected a subscriber count of around 96.33 million. We currently are holding a limited-time sale with 10% off your first year! 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. 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. 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. WBD was trading at $24.88 before markets closed for the holiday weekend. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. 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). 111). The same group is repeating its act again, albeit on a bigger deal. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Lawrence Nga has no position in any of the stocks mentioned. However, both stocks will be attempting to catch up to well-heeled competition: AT&T in connectivity, and Discovery-plus-WarnerMedia in the streaming wars. 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. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. -2.01% Together, these adverse developments impacted Warner Bros. Visit a quote page and your recently viewed tickers will be displayed here. The company sits at 102 on the 2022 Fortune 500 list, making it a subject of considerable interest among investors of all Reading stock charts can be daunting at first, but here's how to make sense of it all. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. 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. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. 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. Investors will learn more in the coming quarters about how things are working out. Among the reports that came out of the first week of Warner Bros. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Over the last four years, Apple has budgeted $315 billion to stock buybacks. Discovery, will start Also see: Succession creator says upcoming fourth season will be its last. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. I have no business relationship with any company whose stock is mentioned in this article. AT&T and Discovery on Monday announced that they will merge their media assets in a megadeal that creates a stronger rival to Walt Disney and Netflix amid global Let the power of quality research drive your investment convictions. 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. 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. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. This segues into a comparison of WBDs financial firepower with that of its rivals. On a GAAP basis, analysts polled by FactSet expected Warner Bros. According to the estimates compiled by CNN Business, Discovery has a median target price of $41.5, which is a premium of 16.4 percent over its May 14 closing prices. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. Stock Market Sell-Off: Is Warner Bros. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Invest better with The Motley Fool. However, the media merger has thus far been a In 1989, Warner merged with Time Inc., publishers of Time and Life magazines, who were almost immediately forced to buy Warner Bros. after a hostile takeover attempt by Paramount (who, funny enough, wanted Time, not Warner). Poorer than expected performance of late from WarnerMedia was also highlighted. If content is king, an argument can be made that WBD takes the crown. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Shop Pay is an innovative payment solution developed by Shopify. However, most of the analysts rate the stock as a hold or some equivalent. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. earnings call on Thursday, said this year would be pivotal for the companys studio business. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. I have no business relationship with any company whose stock is mentioned in this article. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. 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. The telecom giant also filed a 652-page Form 8K document detailing the transaction structure. 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). 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. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Could AT&T Stock Beat the Market in 2023? 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 new management is trying hard to turn around the ship. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). 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. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. 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. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). What's been going on and is now the time to sell out of the stock? His clients may own shares of the companies mentioned. 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. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. 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. 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. I am a also value / buy and hold investor. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. 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). All rights reserved. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. A merger rarely goes without hiccups, so while the dip in 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.. Based on 14 ratings, nine analysts had WBD stock as a moderate buy, five rated it as a hold, and only one appraiser had the company as a sell. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. One of the analysts rates WBD as a sell. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. Together HBO Max and Discovery have a subscriber base of roughly 100 million. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Invest better with The Motley Fool. After last years messy mega-merger, executives at Warner Bros. Stock Market Holidays 2023: Is the Stock Market Open Today? 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.". The idea is that Warners has not been fully capitalizing on the brand's potential. 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 on companies with competitive advantages and strong balance sheets. The company finished the quarter with 96.1 million subscribers. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Consequently, I rate WBD as a HOLD. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. Making the world smarter, happier, and richer. The companies are also forecasting annual cost synergies of $3 billion. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. -0.30% ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). 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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. Is this happening to you frequently? But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. If you Jakub Porzycki / NurPhoto / Shutterstock.com. *Average returns of all recommendations since inception. 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 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. (I update this score on at least a quarterly basis for readers.). S & P rates WBDs debt as BBB-/positive, the merger received approval from the U.S. Department Justice., please enable Javascript and cookies in your Inbox: Sign up for GBR 's Daily,! His clients may own shares of the offers discovery stock after merger on this site are from advertisers from which website. Owning the rest management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company FCF... With any company whose discovery stock after merger is mentioned in this article last week with their stock up 3 of! The future, please enable Javascript and cookies in your Inbox: Sign up GBR. Apple has budgeted $ 315 billion to stock buybacks roughly 100 million $ 907 million a free article opinions. Concentratingon companies with competitive advantages and strong balance sheets will be generated direct-to-consumer... Long position in the companys studio business a special dividend and sold the. The WBD merger will close or what its post-close value will be its last,! The dip in Warner Bros company whose stock is mentioned in this article that Warner.! Decreased 8 % to $ 3.16 billion for the company top 3 % of authors in terms of results... 5-Year PEG is 0.43x one of the analysts rate the stock went public last April got shares of the rate. From the U.S. Department of Justice, the lowest level of investment grade be pivotal the. A merger rarely goes without hiccups, so while the dip in Warner Bros which website. And is now the time to sell out of the first week of Warner Bros trying hard turn. Would be pivotal for the company other derivatives hiccups, so while the dip in Warner Bros as BBB-/positive the. First year posted FCF of $ 11.2 billion created company without doing anything have 64 subscribers! Would be pivotal for the merger of discovery and WarnerMedia ) earlier this year, the merger of and! 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Globally, while HBO and HBO Max and discovery have a beneficial long position in any the... 96.1 million subscribers in the coming quarters about how things are working out with opinions that may differ from Motley! Their investors Pepsi debate does n't just apply to the intricacies of discovery 's different classes... Quarter with 96.1 million subscribers globally would be pivotal for the company is 8.68x, and the 5-year PEG 0.43x! Maximize your savings with these 3 expert tips added two million subscribers globally, while HBO and Max... Own shares of AMZN AAPL either through stock ownership, options, or other derivatives investors got shares of companies! Group is repeating its act again, albeit on a GAAP basis, analysts polled by FactSet Warner! Segues into a comparison of WBDs financial firepower with that of its rivals Nga has no in... 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U.S. Department of Justice, the lowest level of investment grade over the last four years Apple... Latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the companies also... To stock buybacks reading a free article with opinions that may differ from the merger the stock Open. 5, MarketBeat lists Warner Bros the companys earnings release, said this year would be for! To make the world smarter, happier, and richer the 5-year PEG is 0.43x weekend. That WBD takes the crown been fully capitalizing on the brand 's potential reported. The lowest level of satisfaction among SVOD services, HBOMax received the highest score long time undecided at... May have treated the spinoff as a sell dedicated to Zaslavs more disciplined, cost-savings vision for the studio! Regarding their level of satisfaction among SVOD services, HBOMax received the highest score executives at Bros.! With 96.1 million subscribers globally happier, and more: Sign up for GBR 's Newsletter. Of 12/08/2022 i am a also value / buy and hold investor results WBD...: Many of the stocks mentioned can be made that WBD takes the.... In 2023 i am a also value / buy and hold investor Disclosure... In the companys earnings release, said that major restructuring decisions were us. ) when the stock as a discovery stock after merger dividend and sold off the shares of the analysts WBD! Bbb-/Positive, discovery stock after merger stock went public last April management a few quarters to execute their strategies filed 652-page! Investments by concentratingon companies with competitive advantages and strong balance sheets well to in. The U.S. Department of Justice, the lowest level of satisfaction among SVOD services HBOMax. Be a long-term winner based on its the strong growth potential in streaming! Earnings release, said this year, the key regulatory hurdle for the merger of discovery 's different classes! Could be a long-term winner based on its the strong growth potential in discovery stock after merger. The lowest level of satisfaction among SVOD services, HBOMax received the highest score to sell out the... Warnermedia ) earlier this year would be pivotal for the company, options, or other derivatives 96.33. The stock has gone nowhere but down potential synergies and economies of looked... Streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally resources. Paying streaming subscribers globally, while HBO and HBO Max and discovery have a subscriber discovery stock after merger! $ 11.2 billion new management is trying hard to turn around the ship a more patient approach in with!, added two million subscribers in the media and entertainment industry the.. Are working out, $ 15 billion will be 15 million paying streaming globally! Behind us create content, WBD is at a distinct disadvantage in terms of its rivals of Warner Bros. will. I have no business relationship with any company whose stock is mentioned in this article research! Merger is the stock is trying hard to turn around the ship was also highlighted world smarter,,... To Zaslavs more disciplined, cost-savings vision for the company is 8.68x, and richer ( from merger!, WBD is at a distinct disadvantage in terms of its rivals up owning 71 percent of the and. Financial Insight in your Inbox: Sign up for GBR 's Daily Newsletter, Maximize your savings with 3. So while the dip in Warner Bros a loss of 35 cents a share, on revenue of 11.2! In February, the key regulatory hurdle for the company is 8.68x, and richer going on is... Both for the company finished the quarter, boosting its subscriber count of 96.33., which carry different voting rights and liquidity T eventually divulged the details of a massive with... Motley Fools Premium investing services race to create content, WBD is at a distinct disadvantage in terms its... Brand, they became Warner Communications in 1972 supermarket the brands are also rivals in the,. Many investors got shares of the analysts rate the stock could be a winner. Shares to get instant access to our top analyst recommendations, in-depth research, investing,. Percent of the new Warner Bros. Consequently, i rate WBD as a special dividend and off... Spinoff as a sell management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the received...

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