Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. 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. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. 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. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. I also have concerns regarding the toll cord cutting may take on the companys future results. Discovery (NASDAQ:WBD) has slipped over 20%, Comcast (CMCSA) is down about 18%, shares of Disney (DIS) and Amazon (AMZN) have both fallen around 25%, and Netflix (NFLX) takes the proverbial cake, with a stock price that plummeted over 65%. That will simplify things a whole lot, both for the companies and their investors. Please. Warner Bros. Here are the key levels for 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. 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. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. Now, after the merger is complete, we should look at the financials of the merged entity. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. The reality of stock investment is that there's no better tool for building your wealth over time. Wall Street will soon take note of the news and analysts might revise their ratings. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys The European Commission, the executive body of the European Union, had approved the deal in December. Discovery corporation is positioned to achieve material scale as a global streamer while also fortifying its linear networks business and driving significant cost synergies, and that its merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels, per The Fly. Discoverys stock was down 2.9 percent at $27.10 at that time. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. As a result, the new team reduced earnings projections by about $2 billion. One of the analysts rates WBD as a sell. 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. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. Warner Bros. Moreover, the merger resulted in WBD assuming a great deal of debt. 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. 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. 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. In the age of large, mega-sized streaming companies, it appears that bigger is better. Discovery, Inc. Over the last four years, Apple has budgeted $315 billion to stock buybacks. AT&T) wishing to divest a subsidiary (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. The Motley Fool has a disclosure policy. It had been up as much as 9% in morning trading but has been in a Discovery, will start Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Please. The streaming space is crowded, and Warner Bros. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. Offers may be subject to change without notice. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? AT&T announced last week that April 5th at market close will be the record date for AT&T shareholders eligible for the special stock dividend pertaining to the upcoming WBD transaction. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. In a filing in December, Warner Bros. In early Monday trading, the shares of the AT&T and Discovery sound optimistic about the new company's outlook. Learn More. As of Aug. 5, MarketBeat lists Warner Bros. WBD was Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. 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. Boutique investment research shop providing professional coverage on disruptive thematic equities. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. I have approximately 20 years experience as a retail investor. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. earnings call on Thursday, said this year would be pivotal for the companys studio business. 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. We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. All AT&T shareholders on record as of April 5th at market close will be eligible for 0.24 WBD shares for each share of AT&T share owned. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. This increased its subscriber numbers to 76.8 million. The new company will be able to compete in the streaming industry. Discovery. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Additionally, the two companies just initiated their international expansions. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. 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.. Hogwarts Legacy launched on Feb. 10. 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. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. 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. Discovery's outlook for the year. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Copyright 2023 MarketWatch, Inc. All rights reserved. Stock Market Holidays 2023: Is the Stock Market Open Today? There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. Considering the record date is April 5th, we believe the transaction could close within a week's time at the earliest, considering AT&T's requirement to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock at least five business days prior to the actual stock dividend distribution (i.e. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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. What Is the Standard Deduction for People Over 65 in 2023? With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. Now, the record date is not the same as the transaction completion date. 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. Please disable your ad-blocker and refresh. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Discovery may need to fund losses for many years to build a sizable customer base. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. The AT&T merger came in 2018, and was presented as a strategic partnership, since the media landscape is moving hard into streaming, and AT&T owns a major wireless network. Another massive streaming giant round the corner? Net income for the quarter hit $456 million, with EPS of $0.69 cents. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Discovery's share price when the new company began trading earlier this year. All Rights Reserved. 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. To make the world smarter, happier, and richer. As part of the agreement, AT&T will get The management team has plenty of experience executing mergers. 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