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AT&T Stocks Fall Nearly 5% as the Company Reveals Its Warner Bros. Discovery Strategy

AT&T announced the merger between WarnerMedia and Discovery last May, but some details of the deal weren't released until Tuesday.


On Tuesday, telecommunications company AT&T announced its plans to spinoff WarnerMedia in a $43 billion transaction to merge its media properties with Discovery. The move will also cut its dividend by nearly half, going from $2.08 to $1.11 per share.


"In evaluating the form of distribution, we were guided by one objective — executing the transaction in the most seamless manner possible to support long-term value generation," AT&T CEO John Stankey said in the release. "We are confident the spin-off achieves that objective because it's simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities."

The release detailed that each AT&T shareholder will receive an estimated 0.24 shares of the new Warner Bros. Discovery (WBD) stock for each share of AT&T stock they own. AT&T shareholders will own 71% of the new company after the transaction closes in the second quarter.

AT&T's plans follow up the announcement it made last May, when it first announced its $43 billion deal to merge WarnerMedia with Discovery. However, some financial details were not disclosed by the company until the Tuesday announcement.

Related: AT&T Offloads Media Division, Announces Mega-Merger With Discovery, Inc.

In AT&T's May press release, the telecommunications brand wrote that it was considering a number of moves: a spinoff, in which shareholders receive a cash dividend or some ratio of WBD shares for each share of AT&T owned, a split-off, where shareholders choose to keep existing AT&T shares or exchange them for WBD shares, or some combination of the two options.

By choosing a spinoff, Stankey says the move "will let the market do what markets do best," rather than attempt to account for market volatility in the near term.

"We believe that the remaining AT&T and the new WBD are two equities that the market will want to own and the markets to support those equities will develop," Stankey said in the February release. "We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent."

AT&T shares fell nearly 5% at the open and are down 4.18% over a 24-hour period as of 11:35 a.m.

Related: AT&T May Offer Investors a Gift That Goes Beyond its Juicy Dividend

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