discovery stock after merger

The European Commission, the executive body of the European Union, had approved the deal in December. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. have both fallen around 25%, and Netflix (. ) Year-to-date, Warner Bros. Stock Market Holidays 2023: Is the Stock Market Open Today? I have no business relationship with any company whose stock is mentioned in this article. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Revenue from U.S. This might explain the initial fall in Warner Bros. Additional disclosure: I have no formal training in investing. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. As of Aug. 5, MarketBeat lists Warner Bros. Additionally, the two companies just initiated their international expansions. At the time 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. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. There was an unknown error. I am a retail investor, with no formal training in investing. Discovery's share price when the new company began trading earlier this year. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. Among the reports that came out of the first week of Warner Bros. My sister has always struggled with money and drugs. I am a retired law enforcement officer. See which stock you should consider. When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. 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. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. The streaming space is crowded, and Warner Bros. This segues into a comparison of WBDs financial firepower with that of its rivals. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. Warner bros bring sold to Discovery? 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. The spinoff and dividend cut is probably the right long-term move for AT&T, as it will offload some $43 billion in debt to the new WarnerMedia company. 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 future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. 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 Discovery had reported 20 million subs as of Sept. 30 of 2021. The new entity will focus on streaming services. 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. : Holiday Haunt have been shelved. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. 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. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. we will continue to be very thoughtful about our spend. 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. to the transaction, we have better refined our estimates. 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. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. May 17, 2021 2:01 PM EDT. That brings the companys net debt to around 4.5x EBITDA. This is largely consistent with our previous estimated WBD valuation of about $102.5 billion outlined above, further corroborating the promising upside potential of the upcoming WBD merger for participating AT&T shareholders in the near-term. What the Smartest Investors Know About Warner Bros. 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. We currently are holding a limited-time sale with 10% off your first year! 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. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. Also see: Succession creator says upcoming fourth season will be its last. Discovery, with Discovery shareholders holding the rest. 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 streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. The company finished the quarter with 96.1 million subscribers. WBD currently trades for $18.88 a share. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Discovery. I wrote this article myself, and it expresses my own opinions. 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. Discovery, which has no dividend. NFLX also held $6 billion in cash. I am not receiving compensation for it (other than from Seeking Alpha). 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". ET. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. Warner Bros. 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. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. Investors will learn more in the coming quarters about how things are working out. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. AT&T stockholders will end up owning 71 percent of the new Warner Bros. 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. 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. 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. They added that advertising trends in January appeared to have improved from December. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. WBD was trading at $24.88 before markets closed for the holiday weekend. However, Warner Bros. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. 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 Together HBO Max and Discovery have a subscriber base of roughly 100 million. Discovery was word that DC could be restructured. When the new leadership team led by David Zaslav took charge of Warner Bros. The Motley Fool owns shares of and recommends Netflix. If content is king, an argument can be made that WBD takes the crown. 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. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. we also think that one of the big opportunities here is going to be churn reduction. 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.. As part of the agreement, AT&T will get Management projects the combined company will generate $52 billion in revenue. to create Warner Bros. -0.30% Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. I am a also value / buy and hold investor. Discovery a Buy? 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. I wrote this article myself, and it expresses my own opinions. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. -2.01% Here are the key levels for Discovery is now a buy, hold or sell. 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). Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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 announcement has brought out financial gurus to assess whether Warner Bros. 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. 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). Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. I also have concerns regarding the toll cord cutting may take on the companys future results. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. If so, how? 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! Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. I wrote this article myself, and it expresses my own opinions. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. 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. Together, these adverse developments impacted Warner Bros. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. 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. 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.. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. Its an app that people can use just like a regular wallet to store their card details and information. 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