Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Discovery strategic shift. Zaslav hasnt been shy in making changes that align with the Warner Bros. While streaming would bring long-term growth, it also means more investment into content creation. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. 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. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing Revenue from U.S. 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. All relevant risks are not covered in this article. WBD projects $20 billion in content spend in 2022. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. We currently are holding a limited-time sale with 10% off your first year! 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. Year-to-date, Warner Bros. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. The companies are also forecasting annual cost synergies of $3 billion. Making the world smarter, happier, and richer. 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. A merger rarely goes without hiccups, so while the dip in Warner Bros. 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. That will simplify things a whole lot, both for the companies and their investors. Readers should consider this when weighing my buy/hold/sell recommendations. 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. 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. Copyright 2023 MarketWatch, Inc. All rights reserved. At the time Please. 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. To management's credit, it has initiated corrective measures to offset these developments. 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. Discovery (NASDAQ: WBD) when the stock went public last April. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? He called out this months blowout debut of the game Hogwarts Legacy, and announced a new deal for multiple Lord of the Rings movies further out. Discovery, will start -2.01% Making the world smarter, happier, and richer. The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). 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. 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+.. 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. If you have an ad-blocker enabled you may be blocked from proceeding. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. SPX, That brings the companys net debt to around 4.5x EBITDA. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the 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). Invest better with The Motley Fool. These offers do not represent all available deposit, investment, loan or credit products. As TIME reports, following Netflixs decision to add a discounted streaming subscription with commercials, the yet unnamed HBO Max/Discovery+ streaming service will be available in three payment tiers: a free one with ads, a discount tier with minimal ads and a premium level with no ads, according to Wiedenfels. Discovery may need to fund losses for many years to build a sizable customer base. My primary focus is on dividend bearing stocks. To make the world smarter, happier, and richer. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Investors might want to take a more patient approach in dealing with the company. Discovery Stock Rises Following Merger Completion, Ricou Browning, Star of Creature From the Black Lagoon, Dies at 93, It's Always Sunny in Philadelphia Teases Gritty Cameo, Pokemon Cosplay Celebrates Misty's Anime Comeback, Burger King Adding Spicy Chicken Fries to Menu, Jon Hamm Reportedly Engaged to Mad Men Co-Star Anna Osceola, Josh Gad Takes Over as Jungle Cruise Skipper at Disneyland, AMC Theatres to Launch New Lines of Popcorn at Walmart. It's a busy time for Warner, who besides the Discovery merger are also reportedly in the market for a buyer for The CW, a network they co-own with Paramount, the parent company of CBS (and ComicBook.com). Discovery's outlook for the 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 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. AT&T announced last week that April 5th at market close will be the record date for AT&T shareholders eligible for the special stock dividend pertaining to the upcoming WBD transaction. Is This the Best Streaming Stock for 2023? Sign up for THR news straight to your inbox every day. Management discussed a number of concerns to be addressed now that the merger is complete. 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 Motley Fool has a disclosure policy. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. 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). Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. At this point, the majority of heavy lifting (related to restructuring charges etc.) I am a also value / buy and hold investor. The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. 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 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). Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. All rights reserved. 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. 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. 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. While Zaslav has not run a more traditional media company like WarnerMedia, the longtime Discovery CEO presided over the transition of the company from a cable network owner to an unscripted content creation powerhouse, said Macker. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. DISCA stock looks like a good buy at the current prices. 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.) 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. 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. Read More About: AT&T These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. 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. 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%. ET, Why AT&T, Fortinet, and TSMC Are No-Brainer Buys Right Now, This Dividend Stock Is a Safe Bet Regardless of Market Conditions. 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. The Wall Street Journal this month reported that Warner Bros. Visit a quote page and your recently viewed tickers will be displayed here. See which stock you should consider. AT&T stockholders will end up owning 71 percent of the new Warner Bros. This might explain the initial fall in Warner Bros. 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. 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. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. I wrote this article myself, and it expresses my own opinions. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. There was an unknown error. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. Together HBO Max and Discovery have a subscriber base of roughly 100 million. 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. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. 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. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. Discovery, with Discovery shareholders holding the rest. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. 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