2024-07-19 10:05:33 ET
Summary
- Warner Brothers Discovery is considering a bifurcation into two standalone entities, one for linear assets and one for direct-to-consumer assets.
- The potential spinoff could result in significant gains for shareholders, but also poses risks and challenges, including legal battles with bondholders.
- Despite the possibility of a spinoff, Warner Discovery faces operational challenges, including declining box office performance and pressure on its studio segment.
- The likely loss of the NBA, or the much higher costs to keep it, will further pressure the Networks segment, which is Warner's largest cash generator by far.
- The potential of the new spinoff plan for shareholders is real, but the company seems to lack a plan B if the spinoff is blocked or otherwise foiled. A Warner investment remains a major risk. I rate Avoid.
Warner Brothers Discovery ( WBD ) is one of the most interesting stocks in the market right now, and I mean that in ways both good and bad. In fact, the sheer quantity of different news developments engulfing the company all at once right now almost defy counting.
However, there is now another story developing , and this one might trump all the others: according to reports, Warner management is seriously considering a bifurcation of the company itself into two different standalone entities, one for linear assets and one for direct-to-consumer assets; the latter would presumably include the Warner Brothers studio....
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Warner Brothers Discovery: A Major New Deal May Be Taking Shape, Is It Time To Go Long?