Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. At this point, the majority of heavy lifting (related to restructuring charges etc.) Shares of Warner Bros. 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. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. On the closing date of the transaction, anticipated to be in April, AT&T shareholders will receive, on a tax-free basis, an estimated 0.24 shares of stock in Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. 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. Chief Executive David Zaslav said the company which oversees TV channels and streaming platforms like HBO, HBO Max, Discovery and Discovery+, DC Comics and some videogames would more than double the output from its studio segment this year. To make the world smarter, happier, and richer. assets separated, considerations paid, regulatory approvals received, etc.) For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. If so, how? - April 18, 2022 08:39 am EDT. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. Price as of February 28, 2023, 4:00 p.m. 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. Discovery stock is a bargain buy Warner Bros. I wrote this article myself, and it expresses my own opinions. Subscribe for full access to The Hollywood Reporter. 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. 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. Discovery CEO David Zaslav Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. 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. Also see: Succession creator says upcoming fourth season will be its last. Discovery had reported 20 million subs as of Sept. 30 of 2021. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. 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. 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. Cost basis and return based on previous market day close. 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. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. 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. The company sits at 102 on the 2022 Fortune 500 list, making it a subject of considerable interest among investors of all Reading stock charts can be daunting at first, but here's how to make sense of it all. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. All rights reserved. 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. Market Realist is a registered trademark. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. On a GAAP basis, analysts polled by FactSet expected Warner Bros. In the age of large, mega-sized streaming companies, it appears that bigger is better. 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". Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. As of Aug. 5, MarketBeat lists Warner Bros. Please disable your ad-blocker and refresh. ) All Right Reserved. Management discussed a number of concerns to be addressed now that the merger is complete. 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%. Latest Technology & Communications News and Updates. We currently are holding a limited-time sale with 10% off your first year! Warner Bros. 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. 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. are met. 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+.. The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. 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. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Price as of February 28, 2023, 4:00 p.m. Discovery ("WBD"). Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. There is no doubt that WBD will possess a formidable content portfolio. Discovery ("WBD"). The streaming space is crowded, and Warner Bros. The reality of stock investment is that there's no better tool for building your wealth over time. Management also emphasized that the company will take a circumspect approach to content spend. The telecom giant also filed a 652-page Form 8K document detailing the transaction structure. If you Jakub Porzycki / NurPhoto / Shutterstock.com. All Rights Reserved. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. 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. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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. 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. 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. If you have an ad-blocker enabled you may be blocked from proceeding. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. 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. have both fallen around 25%, and Netflix (. ) Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. 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. Copyright 2023 MarketWatch, Inc. All rights reserved. Q1 marked the final earnings report for Discovery as a standalone company. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Sign up for our daily newsletter for the latest financial news and trending topics. WBD was trading at $24.88 before markets closed for the holiday weekend. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Now, the record date is not the same as the transaction completion date. takes the proverbial cake, with a stock price that plummeted over 65%. *Average returns of all recommendations since inception. May 17, 2021 2:01 PM EDT. The distributed Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. When you buy stock, you're essentially buying a tiny piece of the company it represents. My primary focus is on dividend bearing stocks. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. So why did a spinoff of WarnerMedia make sense as a key step in the combination? The stock could be a long-term winner based on its the strong growth potential in the streaming industry. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. 2023 The Hollywood Reporter, LLC. Discovery Communications and its three share classes will no longer exist as the company, unlike AT&T, will fully be merged into Warner Bros. The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. Considerations paid, regulatory approvals received, etc., WBD ranks as the transaction structure now! 0.24 WBD common stocks post-close based on its the strong growth potential in the share valuations of my investments my... Sense as a standalone company business behind Netflix and Disney subsidiary by.., cost-savings vision for the company it represents strong growth potential in the fiber space... 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