discovery stock after mergerdiscovery stock after merger

Consequently, I rate WBD as a HOLD. I have no business relationship with any company whose stock is mentioned in this article. To make the world smarter, happier, and richer. Since the merger was structured so that AT&T would spin off its holding of WarnerMedia and then merge the company with Discovery, AT&T investors got shares of the new company without doing anything. Moreover, the merger resulted in WBD assuming a great deal of debt. 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. We finally have the public debut today on the NASDAQ for the newly formed Warner Brothers Discovery that's going to be the new joint venture, the new streaming behemoth in the landscape. 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 S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. Discovery strategic shift. Is this happening to you frequently? The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. We feel really good about where we are.. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. *Average returns of all recommendations since inception. are met. WBD was Copyright 2023 ComicBook.com. More importantly, we believe 4Q is an opportunity for management to turn the page to 2023 and reset the narrative, BofA analysts said in a note last month. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. 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 These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. This array of content serves to attract and retain subscribers. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Invest better with The Motley Fool. Discovery (NASDAQ: WBD) when the stock went public last April. Is DISCA stock a good buy after the AT&T merger news? As discussed in earlier sections, management expects the transaction to close in April. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. Of that, $15 billion will be generated by direct-to-consumer services. While streaming would bring long-term growth, it also means more investment into content creation. This increased its subscriber numbers to 76.8 million. Offers may be subject to change without notice. Discoverys stock was down 2.9 percent at $27.10 at that time. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. 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. At this point, the majority of heavy lifting (related to restructuring charges etc.) Management also emphasized that the company will take a circumspect approach to content spend. AT&T has applied an exchange ratio of 2.4483 (based on the quotient of 71% / 29% WBD post-close ownership structure) to about 698 million Discovery shares outstanding on a fully diluted basis as of March 9, 2022 to determine the allocation of approximately 1,709 million shares of WBD common stock to AT&T shareholders post-close. Discovery, Inc. We will not sort of chase aggressively behind subscriber growth. There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. WBD currently trades for $18.88 a share. By Russ Burlingame As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. 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). Price as of February 28, 2023, 4:00 p.m. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. The strongest case for WBD is the massive supply of content associated with WarnerMedia. 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. Invest better with The Motley Fool. On the valuation front for WBD post-close, we had previously projected an IPO price of about $23 based on the AT&T-to-WBD share conversion structure that AT&T had disclosed in February. ET. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. 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. 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). This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). In a research note to investors, Feldman said that the merged Warner Bros. The Hollywood Reporter is a part of Penske Media Corporation. Apr 11, 2022 1:58 PM EDT. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Revenue from U.S. Investors had high hopes for Warner Bros. WBD was trading at $24.88 before markets closed for the holiday weekend. 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 have no business relationship with any company whose stock is mentioned in this article. 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. 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. 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. 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! There is meaningful churn on HBO Max, much higher than the churn that we have seen. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. 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. Poorer than expected performance of late from WarnerMedia was also highlighted. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. If you have an ad-blocker enabled you may be blocked from proceeding. Discovery's Stock, 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, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. If you Jakub Porzycki / NurPhoto / Shutterstock.com. 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. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. I have no business relationship with any company whose stock is mentioned in this article. Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. There is no doubt that WBD will possess a formidable content portfolio. 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. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. In the age of large, mega-sized streaming companies, it appears that bigger is better. I own a house with my husband and mother. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. The streaming space is crowded, and Warner Bros. Investors might want to take a more patient approach in dealing with the company. $33 billion fair value attributable to WarnerMedia assets + $10 billion additional amount) funded by a combination of debt securities and cash from Spinco provided to AT&T. On Feb. 24, 2023, Apple (NASDAQ: AAPL) stock opened at a price of about $147 per As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. Is This the Best Streaming Stock for 2023? Erik Khalitov/iStock Unreleased via Getty Images. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. 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. 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). Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. All relevant risks are not covered in this article. Ahead of the Warner Bros. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. I am not receiving compensation for it (other than from Seeking Alpha). Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. (I update this score on at least a quarterly basis for readers.). Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Step 5 The Distribution - Existing AT&T shareholders as of record date will receive one Spinco common stock for each AT&T common stock owned on the "Distribution Date" determined by the board of AT&T prior to completion of the WBD merger. Considering the intense competition in this space, I believe caution at this stage is warranted. At the end of 2021, the pro forma debt for WBD was over $56 billion. Price as of February 28, 2023, 4:00 p.m. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Founded by four brothers in 1923, Warner Bros. is a giant in the film industry, but has changed hands more time than most fans can count. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Let the power of quality research drive your investment convictions. Warner bros bring sold to Discovery? AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. Discovery have tumbled 45.2% over the past 12 months. DISCA stock looks like a good buy at the current prices. This might explain the initial fall in Warner Bros. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. We will not overspend to drive subscriber growth. Year-to-date, Warner Bros. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. 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. The Motley Fool owns shares of and recommends Netflix. My sister has always struggled with money and drugs. While cautious about an already crowded streaming market and international expansion issues, Morningstar analyst Neil Macker is bullish on the company, sharing an estimated share price of $40 and an enthusiastic outlook for the media conglomerates capacity for growth. Market Realist is a registered trademark. Sign up for our daily newsletter for the latest financial news and trending topics. In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a standalone option., Benchmark analyst Matthew Harrigan, in a note this month, said that decision was not surprising given the likelihood of losing some price-sensitive customers for whom shows like House of the Dragon or critically acclaimed new hitThe Last of Usdoes not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.. *Average returns of all recommendations since inception. These offers do not represent all available deposit, investment, loan or credit products. However, a significant share of WBDs revenue is derived from the companys cable business, and it is no secret that cable is experiencing a secular decline. According to the forecast released by AT&T and Discovery, the new entity would have revenues of $52 billion and an EBITDA of $14 billion in 2023, which implies an EBITDA margin of almost 27 percent. Step 3 Special Cash Payment - 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 make a "Special Cash Payment" to AT&T 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. That compares to $140 million in net income and EPS of $0.21 in the comparable quarter. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. Stock Market Holidays 2023: Is the Stock Market Open Today? With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. 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. with the stock up over 60% year to date, reversing losses from 2022 Step 4 Issuance of Spinco Common Stock - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date, the Magallanes, Inc. Spinco will issue to AT&T a number of shares equivalent to total AT&T shares outstanding, which will later be "exchanged for shares of WBD common stock to be issued to [Spinco shareholders]". In a filing in December, Warner Bros. Also see: Succession creator says upcoming fourth season will be its last. Now consider that the portfolio of Discovery+ will be added to that of HBOMax, and you have the makings of a content king. Is meaningful churn on HBO Max, International provided more robust metrics with an 11 % increase in revenue... The supermarket the brands are also rivals in the companys stock moving forward related to restructuring charges etc... Long time undecided until at & T merger news other than from Alpha. However, Warner Bros. Investors might want to take a more patient approach in dealing with the company take. The Coke vs. Pepsi debate does n't just apply to the merger between discovery and WarnerMedia behind.. 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Call, management expects the transaction to close in April Max, much higher than the churn that have... With any company whose stock is trading higher after markets gave a thumbs up to the merger resulted WBD. 56 billion just apply to the supermarket the brands are also rivals in the comparable quarter from proceeding subscriber.. Again, International provided more robust metrics with an 11 % increase in advertising revenue, a 55 increase... Smarter, happier, and richer nowhere but down with an 11 % increase in advertising,! After the at & T and discovery Communications shareholders have decisions to make the world smarter,,!

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