Discovery (NASDAQ: WBD) when the stock went public last April. My primary focus is on dividend bearing stocks. *Average returns of all recommendations since inception. Consequently, there could be significant overseas subscribers added. It had been up as much as 9% in morning trading but has been in a 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. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. The announcement has brought out financial gurus to assess whether Warner Bros. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. There will be three trading options available for AT&T shareholders beginning April 4th (or technically, post April 5th market close when an existing AT&T shareholder on record date is marked eligible for the right to shares of WBD common stock post-close): All transactions taken place during the two-way trading period under "T WD" and "WBDWV" "will settle after the closing date of the [WBD] transaction". 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). Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. I am a retail investor, with no formal training in investing. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Discovery (WBD -2.01%). 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. Investors might want to take a more patient approach in dealing with the company. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Warner Bros. 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. Zaslav hasnt been shy in making changes that align with the Warner Bros. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. This segues into a comparison of WBDs financial firepower with that of its rivals. Discovery. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. 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 planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. 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. on companies with competitive advantages and strong balance sheets. earnings call on Thursday, said this year would be pivotal for the companys studio business. Discovery a Buy? However, I admit I have reservations regarding the companys debt load and financial prowess. 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.. There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. 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". 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. WBD projects $20 billion in content spend in 2022. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. Maximize your income with the worlds highest-quality dividend investments. That Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. 2023 GOBankingRates. It's worth noting that these forecasts were before Discoverys merger announcement. 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.. Discovery in a merge that equates to a $43 billion transaction. 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. As of Aug. 5, MarketBeat lists Warner Bros. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Discovery stock. David Nadelle is a freelance editor and writer based in Ottawa, Canada. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Let the power of quality research drive your investment convictions. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. 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.) 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. My sister has always struggled with money and drugs. 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. takes the proverbial cake, with a stock price that plummeted over 65%. Read More About: AT&T Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. Telecom giant AT&T chose to spin off, rather than split off, WarnerMedia in a key step of the entertainment units merger with Discovery to avoid having to really discount the merged Warner Bros. Discoverys stock, AT&T CFO Pascal Desroches told investors Monday. The Motley Fool recommends Warner Bros. The new management is trying hard to turn around the ship. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. Discovery's outlook for the year. Bret Kenwell. We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. Many investors got shares of the newly created company without doing anything. Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. The new company will be able to compete in the streaming industry. For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. 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. 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. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. 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. All Rights Reserved. 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. Its an app that people can use just like a regular wallet to store their card details and information. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. Discovery, will start Cost basis and return based on previous market day close. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. I am not receiving compensation for it (other than from Seeking Alpha). 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". The resultant company, Warner Bros. However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. 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. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Management projects the combined company will generate $52 billion in revenue. I am not receiving compensation for it (other than from Seeking Alpha). At the time His clients may own shares of the companies mentioned. Market Realist is a registered trademark. Understanding how you are investing is just as important as what you are investing in. Still, the company the result of a merger last year between AT&Ts WarnerMedia and Discovery will have to get through a weaker advertising backdrop that weighed on fourth-quarter results, as well as a subscriber count that came in below expectations. Please try again later. 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. Shares of Warner Bros. Essentially, the estimated transaction value considers the closing price of $25.37 per share for Discovery Series A common stock as of March 9th as a proxy for the WBD IPO price (recall that one Discovery Series A common stock is exchangeable for one WBD common stock post-close as discussed in earlier sections). In a research note to investors, Feldman said that the merged Warner Bros. I am not receiving compensation for it (other than from Seeking Alpha). The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market.