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DC COMICS Owner Could Sell The Company In 2 Years?
Two years ago today I predicted DC COMICS' Owner could sell the company in 2 years and I think it's likely they could do it again because of their huge debt, intense streaming competition, size and more.
PLAYLIST 25 VIDEOS: WARNER BROTHERS DISCOVERY & DAVID ZASLAV
https://www.youtube.com/playlist?list=PLUPkiRW84R1gxDL-u2P1Ac4bE5bONlHix
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https://www.youtube.com/c/AdamPostSpeaks
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https://twitter.com/comicswelove
Zaz Optionality and Elon’s Complaint
https://puck.news/zaz-optionality-and-elons-complaint/
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David Zaslav, WARNER BROTHERS DISCOVERY playlist
https://www.youtube.com/playlist?list=PLUPkiRW84R1gxDL-u2P1Ac4bE5bONlHix
WARNER BROTHERS DISCOVERY, LATEST FINANCIAL RESULTS (SHOWS DEBTS AND INCOME for past 90 days)
https://s201.q4cdn.com/336605034/files/doc_financials/2022/q2/WBD-2022.6.30-10Q-Filed-copy.pdf
INTERVIEWS with DAVID ZASLAV on YouTube (check out his interviews from 2 years ago or older, see how passionately he talks about brands!
https://www.youtube.com/results?search_query=david+zaslav+interview
David Zaslav is going to have “do something” with Warner Bros. Discovery, perhaps even merge with NBCUniversal, to make it a viable long-term enterprise. On Thursday, during WBD’s quarterly earnings call, Zaz lowered his guidance for next year, prompting investors to dump the stock. The question now is whether Wall Street will be patient, or if Zaz’s finger is hovering over Brian Roberts’s name on his speed dial.
Look, the brutal fact is that WBD has $56 billion in debt, an astounding number, most of which is rated by the credit rating agencies just a rung or two above junk. That’s not Zaz’s fault per se, but it is literally the biggest part of the price he agreed to pay to take WarnerMedia off of AT&T’s hands in April. At that time, he promised that he would find $3 billion in synergies and that WBD’s EBITDA for 2023 would be $14 billion. Now Zaz has lowered that estimate to $12 billion, a decrease of 14 percent. That revision came as a surprise to equity investors, causing WBD’s stock to fall nearly 17 percent.
I’m sure Brian Roberts is monitoring the situation at WBD carefully, although the Reverse Morris Trust rules will likely prevent WBD from entering into any kind of joint-venture with Comcast’s NBCU for at least another 18 months or so. On the other hand, given how long it takes such combinations to get regulatory approval and close, there is no time like the present to see if a combination between WBD and NBCU makes any sense at all for Zaz and Brian. I say it does. None of them are saying a peep, of course, and it’s probably six months too early for any kind of serious conversations about how the joint-venture could work. But, let’s face it, even though both NBCU and WBD are not small companies, they are competing in the land of giants and probably each needs to get bigger. NBCU, with about $6.5 billion in EBITDA, is probably worth around $75 billion these days. WBD’s enterprise value is about $88.5 billion—its $35 billion of equity plus $56 billion of debt, minus its $2.5 billion cash on hand. Combined they’re roughly a $150 billion competitor (accounting for the likely divestitures needed for regulatory approval). For all its recent missteps, Disney still has an equity value of $200 billion. So, ya know.
In the meantime, I worry a lot about Zaz’s $56 billion of debt and whether the credit ratings agencies will use the revised 2023 EBITDA number as a catalyst for a downgrade. If that occurs, and depending on the size of the downgrade, Zaz and WBD could find themselves in a whole heap of trouble. At the moment, WBD is on the so-called “BBB Cliff.” If WBD’s debt gets downgraded into “junk” territory, that could open up a rather large can of worms for the Zaz, making it more expensive for the company to refinance debt and putting its debt into the hands of investors who have considerably sharper elbows than par buyers of investment-grade debt.
But let’s not go there—at least not yet. While the revised 2023 EBITDA brings WBD’s debt/EBITDA ratio to 4.7x, making it borderline troublesome, there is also the issue of the 2022 debt/EBITDA ratio (to the extent investors still care about that). On the investor call on Thursday, WBD lowered its EBITDA estimate for 2022 to between $9 billion and $9.5 billion. Let’s give Zaz the benefit of the doubt at $9.5 billion. That means WBD’s 2022 leverage ratio is nearly 6x, which is the kind of debt multiple that leveraged buyout moguls feel comfortable having, not Hollywood titans.
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