Warner Brothers Discover (WBD) is set to split into two companies, separating its legacy cable business from its streaming and studios operations. This split is also delivering a heavy blow to CEO David Zaslav, as his salary is set to be reduced following the move. However, his new compensation includes attractive stock options that could be worth more than $150 million if the company reaches certain share price milestones.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
The new pay structure will take effect only if the split is completed by the end of 2026. Meanwhile, Zaslav received stock options for 21 million shares last week, with the underlying value already exceeding $200 million. Zaslav is considered one of the highest-paid CEOs on Wall Street, because his work speaks for itself. While making the decision of splitting the company, the board insisted that Zaslav continue as CEO of the streaming and studios unit.
Zaslav’s Salary Hit by Company Split
According to the new pay structure, Zaslav will continue to earn $3 million in regular salary, but his target bonus will be significantly reduced to $6 million, down from the $22 million target bonus he had last year. The new bonus will have a cap of $12 million, nearly half of the $23.9 million payout he earned last year.
Additionally, the CEO would receive $15.5 million in equity awards in the first year after the split, followed by $7.5 million annually thereafter. If Zaslav remains in his role, 40% of the options would vest over five years, with the rest vesting in tranches. Notably, if all milestones are met, he could earn more than $150 million in shares from the grant over the five-year period. Moreover, Zaslav’s stock options would continue to vest even if the streaming business is sold or if Zaslav is asked to leave.
The media giant made the bold decision to split its business because the legacy cable TV division was dragging down overall performance. The split will result in the creation of two publicly listed entities, with the studios and HBO Max streaming division separating from its cable networks. Last week, WBD’s bondholders approved the split by a majority vote. Under the new structure, most of the outstanding debt will be tied to the cable business, while streaming and studio unit will take on less debt to better compete in the market.
Is Warner Brothers Stock a Good Investment?
Analysts remain divided on Warner Brothers Discovery long-term stock trajectory. On TipRanks, WBD stock has a Moderate Buy consensus rating based on 10 Buys and eight Hold ratings. Also, the average Warner Brothers Discovery price target of $12.31 implies 16.4% upside potential from current levels. In the past year, WBD stock has gained 51.4%.
