Longtime media analyst Jessica Reif Erlich today begged Warner Bros. Discovery to do something – anything — from selling the company, to selling assets, to finding a streaming joint venture or merger. “In our view, the current composition as a consolidated public company is not working,” the BofA Global Research analyst said.
She had high hopes when Discovery acquired Warner Media in early 2022 but noted the stock has declined more than 70% since then. “At current levels, we believe exploring strategic options for WBD would create more shareholder value vs.
the status quo,” she wrote in a note to clients today. “All options need to be on the table.” Erlich suggested a hypothetical scenario where WBD could spin off its streaming and studio assets, Max and Warner Bros., as a standalone company – which “would be a negative for WBD’s debt, but could be accretive to equity value.” She was bullish at the time of the merger given WBD’s set of “unique and valuable assets” and its scale, which could help protect the challenged linear business as streaming ramped up.
She still thinks the assets are great, and called the balance sheet “perhaps the most underappreciated asset within the company’s portfolio” – investment grade and with a low-interest and long maturity cycle. “This provides a breadth of optionality with how the company can restructure their business.” A DTC/studio spinoff could emerge as a debt free standalone company, leaving the linear assets with all or most of the debt.
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