What's been going on and is now the time to sell out of the stock? 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. 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. 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. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. I own a house with my husband and mother. 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". When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. 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. Latest Technology & Communications News and Updates. Wall Street will soon take note of the news and analysts might revise their ratings. 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. 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.) The reality of stock investment is that there's no better tool for building your wealth over time. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. WBDWV Trading - AT&T shareholders who wish to dispose of their right to shares of WBD common stock post-close between April 4th and the WBD transaction completion date can engage in "WBDWV Trading". Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. Year-to-date, Warner Bros. The Hollywood Reporter is a part of Penske Media Corporation. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. 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. We will not overspend to drive subscriber growth. Learn More. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. It has been awful time for investors in media company Warner Bros. Hogwarts Legacy launched on Feb. 10. Here are the key levels for Discovery Communications and its three share classes will no longer exist as the company, unlike AT&T, will fully be merged into Warner Bros. *Average returns of all recommendations since inception. 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. 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.. Copyright 2023 ComicBook.com. Subscribe for full access to The Hollywood Reporter. Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. 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. 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.. Discovery's share price when the new company began trading earlier this year. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. 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. 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 the age of large, mega-sized streaming companies, it appears that bigger is better. Sign up for our daily newsletter for the latest financial news and trending topics. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. Discovery. 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. By Russ Burlingame 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. Discovery stock was up 5% in midday trading on the stock market today, near 32.50. Warner Bros. At the end of 2021, the pro forma debt for WBD was over $56 billion. 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. Cost basis and return based on previous market day close. Warner Bros. 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. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Maximize your income with the worlds highest-quality dividend investments. The consensus 12-month price target of the five analysts rating the stock is $37.25. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Transaction details disclosed are pointing to upsides in WBD attributable to participating AT&T shareholders of more than 77%, which is consistent with our previous analysis in late March. 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. Management discussed a number of concerns to be addressed now that the merger is complete. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. If you Jakub Porzycki / NurPhoto / Shutterstock.com. Please. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. Zaslav hasnt been shy in making changes that align with the Warner Bros. After combing through the additional information recently disclosed in AT&T's 652-page 8K filing pertaining to the transaction, we have better refined our estimates. 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 1.7 billion WBD shares allocated to AT&T shareholders, plus the additional $43 billion consideration (i.e. 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+.. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. The final green light for the megadeal came at a special shareholder meeting held online; shareholders of AT&T, led by CEO John Stankey, do not need to vote on the combination. 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. Bret Kenwell. Net income for the quarter hit $456 million, with EPS of $0.69 cents. The strongest case for WBD is the massive supply of content associated with WarnerMedia. 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 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. In a research note to investors, Feldman said that the merged Warner Bros. Could AT&T Stock Beat the Market in 2023? Get advice on achieving your financial goals and stay up to date on the day's top financial stories. Apr 11, 2022 1:58 PM EDT. WBD projects $20 billion in content spend in 2022. 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. 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. Invest better with The Motley Fool. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. 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. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. AT&T stockholders will end up owning 71 percent of the new Warner Bros. My primary focus is on dividend bearing stocks. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Erik Khalitov/iStock Unreleased via Getty Images. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. 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. A total of 26.26 million student loan borrowers have applied or were deemed automatically eligible for relief under President Joe Biden's student loan forgiveness program, and there are 16.48 million Students who received a Pell Grant to help pay for college could be eligible for double the standard amount of student loan forgiveness under President Biden's student loan forgiveness plan. Let the power of quality research drive your investment convictions. This might explain the initial fall in Warner Bros. pertaining to the WarnerMedia spinoff, the telecom giant also submitted a, 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. ) Now, the record date is not the same as the transaction completion date. In their prepared remarks, the companies said, The 'pure play' content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio.. 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. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The companies are also forecasting annual cost synergies of $3 billion. Only about a quarter of the analysts rated the stock as a buy. 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 Among the reports that came out of the first week of Warner Bros. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. If you have an ad-blocker enabled you may be blocked from proceeding. However, we have taken additional consideration of the valuation sensitivity analysis performed by the WBD transaction advisors, Allen & Company and J.P. Morgan, as disclosed in AT&T's most recent 8K filing dated March 28th to further gauge the upside potential in WBD post-close. 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. 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 Motley Fool recommends Discovery (C shares). 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. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. They added that advertising trends in January appeared to have improved from December. Market Realist is a registered trademark. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Discovery stock. -0.30% WBD, All AT&T shareholders on record as of April 5th at market close will be eligible for 0.24 WBD shares for each share of AT&T share owned. I wrote this article myself, and it expresses my own opinions. For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. I could be characterized as a safety first investor. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. Discovery ("WBD"). 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. Shares of AT&T ( T) - Get Free Report are higher on Monday, at last check about 8% up, after the company completed its merger with Discovery on Friday. 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