16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? I am a also value / buy and hold investor. I wrote this article myself, and it expresses my own opinions. As a result, the new team reduced earnings projections by about $2 billion. I am not receiving compensation for it (other than from Seeking Alpha). 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. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. 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. Please disable your ad-blocker and refresh. ) Is This the Best Streaming Stock for 2023? Of that, $15 billion will be generated by direct-to-consumer services. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. 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. 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. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. 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.. In the process of merging AT&T at 71% and The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. 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. *Average returns of all recommendations since inception. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. Moreover, the merger resulted in WBD assuming a great deal of debt. Under the terms of the deal, WarnerMedia retained $43 billion in debt. 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. Making the world smarter, happier, and richer. Among the reports that came out of the first week of Warner Bros. 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. By Russ Burlingame Stock Market Holidays 2023: Is the Stock Market Open Today? Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. Discovery had reported 20 million subs as of Sept. 30 of 2021. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. 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. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. 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.) Now consider that the portfolio of Discovery+ will be added to that of HBOMax, and you have the makings of a content king. I have no business relationship with any company whose stock is mentioned in this article. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. 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 Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. I seek a degree of safety in my investments by. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. What Is the Standard Deduction for People Over 65 in 2023? The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. A merger rarely goes without hiccups, so while the dip in Warner Bros. Erik Khalitov/iStock Unreleased via Getty Images. 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. Discovery in a merge that equates to a $43 billion transaction. 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). And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. 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. It has been awful time for investors in media company Warner Bros. Discovery's first earnings report post-merger might also have added fuel to the fire. The Hollywood Reporter is a part of Penske Media Corporation. Discovery's outlook for the year. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. I could be characterized as a safety first investor. Learn More. 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]". : Holiday Haunt have been shelved. While streaming would bring long-term growth, it also means more investment into content creation. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. I am not receiving compensation for it (other than from Seeking Alpha). These offers do not represent all deposit accounts available. There was an unknown error. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. has fallen 5.8% over that period. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. Another massive streaming giant round the corner? 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. Read More About: AT&T Also see: Succession creator says upcoming fourth season will be its last. Discovery a Buy? Additional disclosure: I have no formal training in investing. Hogwarts Legacy launched on Feb. 10. 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. All Rights Reserved. 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 See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. To make the world smarter, happier, and richer. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. we also think that one of the big opportunities here is going to be churn reduction. One is a relatively high rate of churn. 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. 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. This might explain the initial fall in Warner Bros. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys Should we prevent her from inheriting it? Revenue from U.S. Warner bros bring sold to Discovery? Discovery, will start Step 6 The Reclassification - Prior to the completion of the WBD merger, Discovery will "amend and restate the "Discovery charter" to outline the Discovery-to-WBD share conversion structure for each of its Series A, B and C common stocks and Series A-1 and C-1 preferred stocks as discussed in the "WarnerMedia Spinoff Share Structure" section above. (I update this score on at least a quarterly basis for readers.). WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. If you Jakub Porzycki / NurPhoto / Shutterstock.com. Consequently, I rate WBD as a HOLD. 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. The strongest case for WBD is the massive supply of content associated with WarnerMedia. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. 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. Discovery. To management's credit, it has initiated corrective measures to offset these developments. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. Management also emphasized that the company will take a circumspect approach to content spend. 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. Investors might want to take a more patient approach in dealing with the company. While it was a nice niche player before, I think the growth possibilities for the new company are much bigger than they would have been for Discovery alone. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. 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. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. 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. Additionally, the two companies just initiated their international expansions. are met. His clients may own shares of the companies mentioned. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. Now that the close of the WarnerMedia deal is approaching, we are near the starting line of a new era for AT&T, said Stankey on Friday. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. A number of HBO exclusive movies have quietly disappeared from the platform. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Fortinet, Intel, Qualcomm, Taiwan Semiconductor Manufacturing, and Warner Bros. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. I have no business relationship with any company whose stock is mentioned in this article. Discovery was word that DC could be restructured. Warner Bros. WBD Transaction Structure (AT&T 8K filing, with annotations by Author. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing 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. 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! 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. 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. ET. In a research note to investors, Feldman said that the merged Warner Bros. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. Bret Kenwell. Discovery stock was up 5% in midday trading on the stock market today, near 32.50. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. Warner Bros. 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. So why did a spinoff of WarnerMedia make sense as a key step in the combination? Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. Is this happening to you frequently? Let the power of quality research drive your investment convictions. 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. Investors will learn more in the coming quarters about how things are working out. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. It's worth noting that these forecasts were before Discoverys merger announcement. Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. These offers do not represent all available deposit, investment, loan or credit products. Cost basis and return based on previous market day close. 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. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. 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. That Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. 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 We will not overspend to drive subscriber growth. Our focus is to invest in content and platforms that extend the life and return of our global IP, and position us to drive greater returns out of each dollar of content spend than our peers and to ultimately drive free cash flow. 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. Discovery strategic shift. Maximize your income with the worlds highest-quality dividend investments. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Together, these adverse developments impacted Warner Bros. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. All Rights Reserved. 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). An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through 2025, while expenses are expected to accelerate. Make this your go-to guide to understanding stock charts. AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. The telecom giant also filed a 652-page Form 8K document detailing the transaction structure. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. Discovery's share price when the new company began trading earlier this year. The company the result of a merger last year between AT&Ts WarnerMedia and Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. Discovery. In a filing in December, Warner Bros. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. At the end of 2021, the pro forma debt for WBD was over $56 billion. Ahead of the Warner Bros. The Motley Fool recommends Warner Bros. Readers should consider this when weighing my buy/hold/sell recommendations. Madonna Breaks Silence on Death of Brother Anthony Ciccone: You Planted Many Important Seeds, Paramount CFO: Streaming Content Spending Could Come in Below $6B Target In 2024, BBC Journalism Union Members Vote in Favor of Strike. Apr 11, 2022 1:58 PM EDT. When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. 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. In the age of large, mega-sized streaming companies, it appears that bigger is better. Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. Discovery (WBD -2.01%). That compares to $140 million in net income and EPS of $0.21 in the comparable quarter. Discovery CEO David Zaslav Discovery, which has no dividend. They added that advertising trends in January appeared to have improved from December. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. 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. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. 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 ("WBD"). 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. I am a retired law enforcement officer. Discovery (NASDAQ: WBD) when the stock went public last April. 2023 GOBankingRates. 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. 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. One of the analysts rates WBD as a sell. See which stock you should consider. 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