AT&T investors are on the run after the company shocked Wall Street by unloading its WarnerMedia division to Discovery.
It's becoming increasingly clear that studios are able to cost-effectively deliver their product directly to consumers.
(Bloomberg) -- AT&T Inc. fell the most in more than a year as investors digested plans for a smaller dividend payout from the phone giant following the planned merger of its WarnerMedia division with Discovery Inc.Shares of AT&T fell as much as 7.9% Tuesday in New York, the steepest intraday decline since March 2020. The stock was up 9.1% through Monday’s close. Discovery shares were up less than 1% Tuesday to $33.99.Without the cash flow from WarnerMedia, AT&T said Monday that it will lower its dividend payout ratio to 43% of cash flow. That translates into to about $9 billion annually, down from $15 billion before, according to Colby Synesael, an analyst with Cowen & Co. As part of the deal, AT&T shareholders will own 71% of the combined media company while Discovery investors will get 29%. The parties value the new entity at $130 billion, including debt.“I thought market was OK with that, but apparently not,” Synesael said. “Seems like it took a day for people to do the math.”The idea to create a new media giant, which is expected to have a name in the coming days, started with a text from Discovery Chief Executive Officer David Zaslav to his AT&T counterpart, John Stankey.Their discussions coalesced into a merger of media properties combining AT&T’s HBO, Warner Bros. and TNT with a roster of Discovery channels, including the Food Network, and reality-TV shows like “Deadliest Catch” and “Naked and Afraid.”“This is a major reset of the chessboard,” said Todd Lowenstein, chief equity strategist with the Private Bank at Union Bank. “Markets seem unwilling to render a favorable verdict at this point.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.