Shares of Warner Bros. Discovery (WBD) started trading on April 11 at $24.89. After making a high of $25.89, shares have subsided to $24.68 levels in the past two days, commanding a total market cap of about $55.35 billion.
WBD is a result of the spinoff of AT&T’s (T) interest in WarnerMedia and the consequent merger of WarnerMedia with Discovery. Pursuant to the transaction, all classes of shares of Discovery were converted and reclassified into a single share class line of WBD.
The Combination
As a result of this combination, WBD has been created, a global behemoth in the entertainment and streaming category. Importantly, the move brings together WarnerMedia’s entertainment, sports, and news assets with Discovery’s non-fiction and international entertainment and sports businesses.
Management Weighs In
CEO of Warner Bros. Discovery, David Zaslav, said, “With our collective assets and diversified business model, Warner Bros. Discovery offers the most differentiated and complete portfolio of content across film, television, and streaming. We are confident that we can bring more choice to consumers around the globe while fostering creativity and creating value for shareholders.”
AT&T is gunning for major investments post-transaction. CEO, John Stankey, stated, “With the close of this transaction, we expect to invest at record levels in our growth areas of 5G and fiber, where we have strong momentum, while we work to become America’s best broadband company.”
Upon closing of the transaction, AT&T received $40.4 billion in cash. Moreover, AT&T investors also received 0.241917 shares of WBD for each AT&T common share held. In all, AT&T investors received about 71% of WBD shares, with the rest going to investors in Discovery.
Analysts’ Take
Evercore ISI analyst Vijay Jayant has assigned the stock a Buy rating alongside a price target of $40. Overall, based on four Buys and a Hold the Street has a Strong Buy Consensus rating on WBD. The average Warner Bros. Discovery price target of $43.25 implies a potential upside of 75.24% for the stock.
Closing Note
This strategic move may be a win-win for all the stakeholders involved. The new entity, WBD, will have an even bigger and more diverse offering of content for its global audience while also having more command over the market. Notably, this will also help WBD face-off market competition.
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