Discovery. 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. Readers should consider this when weighing my buy/hold/sell recommendations. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. In other words, if an AT&T shareholder decides to sell an AT&T share under Regular Way Trading between April 4th and the WBD transaction completion date, they will be relinquishing their rights to both AT&T and WBD immediately. 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Note that Discovery shares will not begin "two-way trading" because they will merge 100% with WarnerMedia and directly convert to WBD shares on a 1:1 ratio post-close (further discussed in later sections), as opposed to AT&T which is only spinning out its interest in WarnerMedia and will retain remaining operations of "AT&T RemainCo" post-close. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. This might explain the initial fall in Warner Bros. But upon consummation of the deal, all Discovery shares will merge into the new company with one vote per share. Copyright 2023 MarketWatch, Inc. All rights reserved. I have no business relationship with any company whose stock is mentioned in this article. 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). When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. I have no business relationship with any company whose stock is mentioned in this article. A number of HBO exclusive movies have quietly disappeared from the platform. If you have an ad-blocker enabled you may be blocked from proceeding. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. 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. distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. 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%. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. Here are the key levels for All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. Please. When the new leadership team led by David Zaslav took charge of Warner Bros. 2023 GOBankingRates. For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. At least give management a few quarters to execute their strategies. Consequently, there could be significant overseas subscribers added. WBD was trading at $24.88 before markets closed for the holiday weekend. Zaslav hasnt been shy in making changes that align with the Warner Bros. When you buy stock, you're essentially buying a tiny piece of the company it represents. Discovery, will start Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. 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. You can click on the 'unsubscribe' link in the email at anytime. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. Cost basis and return based on previous market day close. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. The service will allow you to follow my model portfolio, interact with me directly, and participate in chat rooms with other subscribers. 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. That will simplify things a whole lot, both for the companies and their investors. WBD currently trades for $18.88 a share. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. 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. Latest Technology & Communications News and Updates. If you Jakub Porzycki / NurPhoto / Shutterstock.com. I wrote this article myself, and it expresses my own opinions. 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. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. have both fallen around 25%, and Netflix (. ) Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. A merger rarely goes without hiccups, so while the dip in Warner Bros. They added that advertising trends in January appeared to have improved from December. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. 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. Discovery have tumbled 45.2% over the past 12 months. Of that, $15 billion will be generated by direct-to-consumer services. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. Only about a quarter of the analysts rated the stock as a buy. Lawrence Nga has no position in any of the stocks mentioned. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. 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. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. 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. 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. to create Warner Bros. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. I also have concerns regarding the toll cord cutting may take on the companys future results. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. 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 as a consensus (moderate) buy with an analyst price target of $24.79. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. Another massive streaming giant round the corner? This array of content serves to attract and retain subscribers. The streaming space is crowded, and Warner Bros. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. 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