DISCB - Why Warner Bros. Discovery Investors Should Tread Lightly
After U.S. antitrust clearance, AT&T (NYSE:T) is closer to spinning off its interest in WarnerMedia in a merger with Discovery (NASDAQ:DISCA) (NASDAQ: DISCB) (NASDAQ:DISCK). The merger will create Warner Bros. Discovery (WBD), a formidable player in the streaming wars. But before you invest, keep in mind that the newly formed company faces an uphill battle.
The deal is expected to close as soon as April if approved by Discovery shareholders. WBD will assume the $43 billion price of the WarnerMedia spin-out as debt, along with Discovery's $15 billion in debt, creating a total gross debt of $58 billion. Between Discovery Plus and HBO MAX, the new company will inherit roughly 94 million paid subscribers.
AT&T will own 71% of WBD, and shareholders will receive approximately 0.24 shares of the new company for each share of AT&T stock owned. Meanwhile, Discovery currently owns the remaining 29% of the future media giant. Discovery will reclassify its three share classes immediately prior to the merger, before automatically converting into WBD common stock.
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Why Warner Bros. Discovery Investors Should Tread Lightly