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. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. To make the world smarter, happier, and richer. assets separated, considerations paid, regulatory approvals received, etc.) I have no business relationship with any company whose stock is mentioned in this article. My sister has always struggled with money and drugs. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. 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). Looking for a helping hand in the market? Prior to WBDs quarterly report announcement, Barrons reported that analysts at Goldman Sachs reinstated a buy rating and price target of $22 on Warner Bros. The resultant company, Warner Bros. 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. 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. They added that advertising trends in January appeared to have improved from December. 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. The Motley Fool owns shares of and recommends Netflix. Learn More. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. In fact, Amazon is the sole company with a share price gain over that time frame, and it lags the S&P by more than 15%. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Subscribe for full access to The Hollywood Reporter. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Warner Bros. By Russ Burlingame 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. Discovery, with Discovery shareholders holding the rest. Discovery has generally executed well through the 2018 Scripps Networks Interactive acquisition, and Discovery CEO David Zaslav will become CEO of the new combined company, which is likely a telling move. The firm maintained its market perform rating on Warner Bros. Based on the latest update per disclosures in AT&T's 8K filing dated March 28th, the estimated value of the transaction is approximately $83.4 billion. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. Discoverys stock was down 2.9 percent at $27.10 at that time. 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. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. The management team has plenty of experience executing mergers. However, Warner Bros. Is This the Best Streaming Stock for 2023? AT&T stockholders will end up owning 71 percent of the new Warner Bros. Offers may be subject to change without notice. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. With the 5G transition in full swing, the company can't afford to be distracted with the streaming media wars, paying down debt, and maintaining the dividend all at once. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. 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. May 17, 2021 2:01 PM EDT. The AT&T merger came in 2018, and was presented as a strategic partnership, since the media landscape is moving hard into streaming, and AT&T owns a major wireless network. Discovery stock. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. Discovery was word that DC could be restructured. 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. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. This increased its subscriber numbers to 76.8 million. 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. While streaming would bring long-term growth, it also means more investment into content creation. Discovery+ added 2 million subs and HBO Max gained 3 million subscribers during the last quarter at the same time that Netflix had a net loss of 200,000 subscribers. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. AT&T and Discovery sound optimistic about the new company's outlook. For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. 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. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. However, Discovery is an expert in international content, with a presence across 220 markets, and expertise adapting its unscripted content to many other languages. Market Realist is a registered trademark. Another massive streaming giant round the corner? The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. 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). 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. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. 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. 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. Is this happening to you frequently? We currently are holding a limited-time sale with 10% off your first year! Discovery CEO David Zaslav Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. As part of the agreement, AT&T will get We feel really good about where we are.. -2.01% A merger rarely goes without hiccups, so while the dip in Warner Bros. The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. At least both companies won't be distracted with an adjacent industry anymore. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. One is a relatively high rate of churn. 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. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. In a research note to investors, Feldman said that the merged Warner Bros. Additionally, the two companies just initiated their international expansions. 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". 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. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. Discovery. Let the power of quality research drive your investment convictions. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. Is DISCA stock a good buy after the AT&T merger news? All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. Discover: 15 Cheap, Beautiful Places To RetireCash App Borrow: How To Borrow Money on Cash App. 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 I am not receiving compensation for it (other than from Seeking Alpha). Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. 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. 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 The Motley Fool has a disclosure policy. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys 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. The companies are also forecasting annual cost synergies of $3 billion. It's worth noting that these forecasts were before Discoverys merger announcement. 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. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Discovery, with Discovery shareholders holding the rest. 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+.. Of that, $15 billion will be generated by direct-to-consumer services. Discovery ("WBD"). 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. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. His clients may own shares of the companies mentioned. 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. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. Warner Bros. So why did a spinoff of WarnerMedia make sense as a key step in the combination? 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. Management also emphasized that the company will take a circumspect approach to content spend. Revenue from U.S. Making the world smarter, happier, and richer. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. The transformation weve undergone over the past 18 months while delivering outstanding operational results has brought us to this point. Make this your go-to guide to understanding stock charts. What the Smartest Investors Know About Warner Bros. Boutique investment research shop providing professional coverage on disruptive thematic equities. 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. These offers do not represent all available deposit, investment, loan or credit products. Discovery a Buy? After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto. There is no doubt that WBD will possess a formidable content portfolio. 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 have tumbled 45.2% over the past 12 months. Making the world smarter, happier, and richer. I have no business relationship with any company whose stock is mentioned in this article. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. If content is king, an argument can be made that WBD takes the crown. 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. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Management discussed a number of concerns to be addressed now that the merger is complete. 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. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. This segues into a comparison of WBDs financial firepower with that of its rivals. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. However, I admit I have reservations regarding the companys debt load and financial prowess. The company finished the quarter with 96.1 million subscribers. 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". I am a also value / buy and hold investor. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. At least give management a few quarters to execute their strategies. In our last coverage on the upcoming WBD transaction and its implications for AT&T post-close, we had provided a detailed estimate on WBD's upside potential attributable to AT&T shareholders post-close. 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