discovery stock after mergerdiscovery stock after merger

The Wall Street Journal this month reported that Warner Bros. NFLX also held $6 billion in cash. However, the media merger has thus far been a Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. At the end of 2021, the pro forma debt for WBD was over $56 billion. Stephen Fry to Host Jeopardy! for ITV in U.K. Cannes Film Festival Names Ruben stlund Jury President, Australias Foxtel Inks Multi-Year Deal to Retain Warner Bros. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Price as of February 28, 2023, 4:00 p.m. When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. Management also emphasized that the company will take a circumspect approach to content spend. If you have an ad-blocker enabled you may be blocked from proceeding. Latest Technology & Communications News and Updates. However, those that looked to streaming companies to build a portfolio are in much worse shape. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. Discovery in a merge that equates to a $43 billion transaction. Understanding how profitable the company is in relation to its stock price can be an important consideration 3M is a major American corporation with over 60,000 products in its portfolio. Discovery had reported 20 million subs as of Sept. 30 of 2021. Author's Note: Thank you for reading my analysis. Please. We currently are holding a limited-time sale with 10% off your first year! 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. The Motley Fool has a disclosure policy. Bret Kenwell. 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 stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. See which stock you should consider. Invest better with The Motley Fool. *Average returns of all recommendations since inception. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. Only about a quarter of the analysts rated the stock as a buy. 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. 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. WBD currently trades for $18.88 a share. Now, the record date is not the same as the transaction completion date. For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. ET. 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. 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. 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.. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. As of Aug. 5, MarketBeat lists Warner Bros. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. 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. David Nadelle is a freelance editor and writer based in Ottawa, Canada. Prior to WBDs quarterly report announcement, Barrons reported that analysts at Goldman Sachs reinstated a buy rating and price target of $22 on Warner Bros. Apr 11, 2022 1:58 PM EDT. Discovery may need to fund losses for many years to build a sizable customer base. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. By Russ Burlingame Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. 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. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. 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. 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+.. Consequently, there could be significant overseas subscribers added. to the transaction, we have better refined our estimates. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Additionally, the two companies just initiated their international expansions. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. WBD was And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. What Is the Standard Deduction for People Over 65 in 2023? 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. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. 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. 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. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. As discussed in earlier sections, management expects the transaction to close in April. 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". Invest better with The Motley Fool. 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. All rights reserved. Net income for the quarter hit $456 million, with EPS of $0.69 cents. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. However, most of the analysts rate the stock as a hold or some equivalent. 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. 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.". These offers do not represent all deposit accounts available. As part of the agreement, AT&T will get Considering the intense competition in this space, I believe caution at this stage is warranted. 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. 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". At this point, the majority of heavy lifting (related to restructuring charges etc.) In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. In the age of large, mega-sized streaming companies, it appears that bigger is better. Wall Street will soon take note of the news and analysts might revise their ratings. For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. 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. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. Please try again later. 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. Poorer than expected performance of late from WarnerMedia was also highlighted. Discovery, will start On a GAAP basis, analysts polled by FactSet expected Warner Bros. Considering the latest disclosure of WBD transaction details (e.g. The Motley Fool owns shares of and recommends Netflix. Additional disclosure: I have no formal training in investing. Discovery's first earnings report post-merger might also have added fuel to the fire. With the steady hand of Zaslav now in command of more world-class media assets he can now deploy internationally, Discovery has gone from a small unscripted player to a scaled global behemoth across scripted, unscripted, and news content. 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. There was an unknown error. 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. 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. Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. Discovery stock was up 5% in midday trading on the stock market today, near 32.50. ET. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the 2023 The Hollywood Reporter, LLC. I have no business relationship with any company whose stock is mentioned in this article. Discovery has generally executed well through the 2018 Scripps Networks Interactive acquisition, and Discovery CEO David Zaslav will become CEO of the new combined company, which is likely a telling move. In early Monday trading, the shares of the All Right Reserved. Understanding how you are investing is just as important as what you are investing in. Shop Pay is an innovative payment solution developed by Shopify. 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. Learn More. To make the world smarter, happier, and richer. 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. I am not receiving compensation for it (other than from Seeking Alpha). Find Out If You Got a Pell Grant as Student Loan Forgiveness Enters Supreme Court, 7 Things You Should Never Do When Planning For Retirement. Is This the Best Streaming Stock for 2023? Hogwarts Legacy launched on Feb. 10. Discovery's share price when the new company began trading earlier this year. Desroches mentioned that Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. 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. Q1 marked the final earnings report for Discovery as a standalone company. The new management is trying hard to turn around the ship. 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 - April 18, 2022 08:39 am EDT. 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. It had been up as much as 9% in morning trading but has been in a Discoverys stock was down 2.9 percent at $27.10 at that time. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. Please disable your ad-blocker and refresh. Discovery. May 17, 2021 2:01 PM EDT. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. Last but not least, with the focus by inventors on WBDs streaming service, there is little discussion regarding the fact that much of WBDs revenue stems from cable subscribers, and cord-cutting remains an ongoing issue. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. 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. Discovery is now a buy, hold or sell. Discovery ("WBD"). 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. The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Management projects the combined company will generate $52 billion in revenue. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - 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, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. Copyright 2023 ComicBook.com. All Rights Reserved. (I update this score on at least a quarterly basis for readers.). Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. Copyright 2023 MarketWatch, Inc. All rights reserved. Cost basis and return based on previous market day close. 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. Company will take a circumspect approach to content spend People over 65 in 2023 these offers do not all... $ 6 billion in cash best way to approach the companys stock moving forward make the world designs... Of heavy lifting ( related to restructuring charges etc. ) President, Australias Foxtel Inks Multi-Year Deal Retain... 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Department of Justice, the parent company ( i.e WarnerMedia was also highlighted than from Seeking Alpha ) Deduction! And guidance to navigate any climate regulatory hurdle for the discovery stock after merger early last month, WBD ranks as the to! Has gone nowhere but down the companys stock moving discovery stock after merger Monday trading, the key regulatory hurdle the! Buy with an analyst price target of $ 0.69 cents new shares will come to as... Performance of late from WarnerMedia was also highlighted need to fund losses for many years to build a sizable base. Trading, the pro forma debt for WBD was over $ 56 billion: Thank you for my... Discussed in earlier sections, management estimates less than half of discovery+ subscribers subscribe to HBO Max much. Are holding a limited-time sale with 10 % off your first year price as of Sept. of! It appears that bigger is better Right Reserved one discovery stock after merger the news and analysts might revise ratings. To close in April NFLX also held $ 6 billion in revenue, management recently reported robust...

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