Warner Bros. Discovery WBD is facing a $9 billion write-down, causing its stock to plummet by more than 10%. This comes in the wake of the company’s realization that the merger of WarnerMedia and Discovery was not as fruitful as anticipated.
What Happened: Warner Bros. Discovery, the entity formed from the $43 billion deal between AT&T and Discovery in 2021, last month floated the idea of a breakup. The decision was a signal of the company’s realization that the merger had not yielded the expected results.
The company has now absorbed a $9 billion accounting blow, acknowledging that its TV assets are not as valuable as initially estimated, further solidifying the merger failure claims.
Warner Bros. Discovery did not immediately respond to Benzinga's request for comment.
"Two years ago market valuations and prevailing conditions for legacy media companies were quite different than they are today," CEO David Zaslav said on the earnings call.
"This impairment acknowledges this and better aligns our carrying values with our future outlook."
This write-down is largely attributed to the fact that they will no longer be broadcasting NBA games after the forthcoming season. NBA has now awarded a $76 billion, 11-year media rights deal to Walt Disney Co., Comcast Corp., and Amazon.com Inc.
This news triggered a more than 11% fall in the company’s stock in premarket trading on Thursday. However, Wall Street’s response has been relatively subdued, as the market had already incorporated the company’s struggles into its stock price.
Time Warner – which was acquired by AT&T for $85.4 billion in 2018 – was eventually spun off by AT&T as WarnerMedia and then merged with Discovery to become Warner Bros. Discovery. It now has a market capitalization of just $19 billion amid what Zaslav described as “tough conditions in the legacy business.” The stock is down 68.49% since its listing in 2022 and 33.88% so far this year.
Despite the ongoing decline of its traditional TV networks like TNT, TBS, and TLC, Warner Bros. Discovery CEO, Zaslav, has reassured investors of a promising future for the company.
Zaslav has also shown interest in consolidation, sparking rumors that the company may be a potential acquisition target, particularly in light of its decreased market value following the recent news.
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Why It Matters: The $9 billion write-down is a significant blow to Warner Bros. Discovery, which has been struggling with declining stock prices and the challenges of its traditional TV networks. The company had previously considered breaking up, but this plan was abandoned. The new strategy is to sell smaller parts of the company, such as a Polish broadcasting company or a segment of its games business, reported Financial Times.
Earlier in July, CEO Zaslav had expressed the need for a business-friendly president to support companies in their consolidation and operational improvement efforts. This admission of overpaying for TV networks and the subsequent write-down could further complicate the company’s future.
Meanwhile, Warner Bros. Discovery reported quarterly sales of $9.713 billion, which missed the analyst consensus estimate of $10.071 billion by 3.55% and represents a 6.23% decrease from the same period last year. The company reported GAAP losses of $4.07 per share.
Price Action: Warner Bros. Discovery’s shares closed 1.18% up on Wednesday at $7.71. At the time of writing, the stock was down 11.30% in premarket trading, according to Benzinga Pro data.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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