Some companies just never seem to get things right on their own. Some of those companies look for buyers to come save the day for their shareholders. And then some companies flounder enough that the only way they think they can save their shareholders is by breaking up into multiple companies.

Warner Bros. Discovery, Inc. (NASDAQ: WBD) has just entered the realm of “special situations” by announcing that the company will split into two companies — a new Streaming & Studios company and a Global Networks company. This is a situation where tactical investors may have too long to wait compared to patient “special situation” investors.

While the transaction is to be conducted in a tax-free manner and is said to be “enabling each to maximize its potential,” shareholders may have more questions than assurances here. The long time to execute this separation just feels like a huge ask for shareholders who have been stomaching long-term losses here. On top of such a long wait, some aspects of cross ownership after the transaction may not resemble most true separations for a while.

Now just take a look at how many moving parts there are going to be in its vast brands. Now it’s easier to see why it may take quite some time.

THE REACTION SPEAKS LOUDER THAN WORDS

Warner Bros. Discovery stock closed at $9.82 on Friday, with a 52-week range of $6.64 to $12.70. The stock opened up almost 9% higher at $10.62 on Monday and very briefly traded up as much as 12% at $11.10 shortly after Monday’s opening bell. The stock was up barely 1% at $9.95 in late-morning trading. This is just not a very ringing endorsement by Wall Street’s immediate reaction.

What is interesting here is that Warner Bros. Discovery was amalgamated just three years earlier after AT&T spun off WarnerMedia into its own company and merged with Discovery Communications in a transaction valued at more than $40 billion at the time. The combined company’s market cap is about $26 billion as of this time. Warner Bros. Discovery then implemented a restructuring just in December (2024), and this new effort to break the company into two companies is not expected to be finalized until mid-2026.

Long-term shareholders who have stuck in this situation have lost roughly two-thirds of their value over the last three years. Now there is going to remain some ongoing influence whereby Global Networks will continue to hold up to a 20% retained stake in Streaming & Studios. The transaction just doesn’t seem to have a simple enough of a structure with a clear and rapid enough of an exit for shareholders to decide if they want to own one, both or neither of the companies in the future.

THE FUTURE COMPANIES

According to the release, the new Streaming & Studios company will be made up of Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO, and HBO Max. The unit will also include the film and television libraries of films and shows filmed over its history. The press release also indicated that Studios will be on a path back to their target of at least $3 billion in annual adjusted EBITDA.

The Global Networks company will comprise its entertainment, sports and news television brands — CNN, TNT Sports, and Discovery. It will also include its free-to-air channels in Europe, as well as digital products like the Discovery+ streaming service and Bleacher Report. Global Networks’ assets currently have a reach of 1.1 billion unique viewers in 68 languages across 200 countries and territories.

BUT, IT’S COMPLICATED

The release also noted its key roles going forward, with both continuing in their present roles at WBD until the separation:

• David Zaslav, President and CEO of Warner Bros. Discovery, will serve as President and CEO of Streaming & Studios.
• Gunnar Wiedenfels, CFO of Warner Bros. Discovery, will serve as President and CEO of Global Networks.

According to Samuel A. Di Piazza, Jr., Chairman of the Warner Bros. Discovery board:

“We committed to shareholders to identify the best strategy to realize the full value of our exciting portfolio of assets, and the Board believes this transaction is a great outcome for WBD shareholders. This announcement reflects the Board’s ongoing efforts to evaluate and pursue opportunities that enhance shareholder value.”

Shareholders will want to consider that bridge financing has been secured that has to be refinanced ahead of this separation. There is also going to be some influence where Global Networks will still have a say in what happens at Streaming & Studios via a post-separation stake. This is outlined here:

Warner Bros. Discovery announced the commencement of tender offers and related consent solicitations across its existing capital structure to enhance its debt portfolio, which will be funded by a committed bridge facility of $17.5 billion provided by J.P. Morgan. The bridge facility is expected to be refinanced prior to the separation. Both companies will have a clear path to de-leveraging with significant cash flow and strong liquidity through cash and revolver availability. In addition, Global Networks will hold up to a 20% retained stake in Streaming & Studios that it will plan to monetize in a tax-efficient manner to enhance the de-leveraging of its balance sheet.

WALL STREET SPEAKS!

The transaction is too fresh to have many analyst marks on the terms. That said, there are still many fresh reports.

BofA Securities maintained its Buy rating and $14 price objective as recently as June 2, 2025. The report admitted that WBD shares have been a significant underperformer against BofA’s own expectations and the broader market. And while several of the financial assumptions underpinning the deal have not materialized, BofA said at the time that it remains believers in the unique and valuable assets underpinning the company. And BofA was already in the camp that a potential spin off of Studios and Streaming “could be the best way to unlock the significant unrecognized value of the company.”

Barron’s wrote that this action might be “a case of too little, too late” for WBD shareholders. The financial publication warned that a coming drop in consumer spending could lead to users ditching streaming services like HBO Max. Barron’s also opined that it is also difficult to see why investors would buy stock in Warner’s cable business.

CFRA (SD&P) highlighted a report just on June 7, 2025. Its take is that WBD requires further streamlining and cost cutting to improve profitability. It also opined that its planned restructuring into Global Linear Networks and Streaming & Studios divisions could lead to potential sale of cable networks. And with other concerns, CFRA cut its price target down to $9 from $12. That report said:

This conservative valuation acknowledges significant challenges in executing profitable growth amid industry transformation, declining pay-TV networks, and intense streaming competition.

Barclays is one of the only real brokerage reports that has issued a post-transaction view. The firm is keeping its Equal-Weight rating with a $9 price target. Their view is that this effort has been expected by investors since it announced a restructuring late in 2024. Barclays warns that WBD has $37 billion of gross debt and another $5 billion in off-balance-sheet debt, and that neither entity will have enough EBITDA to absorb that debt on a standalone basis. The report also suggested that realizing higher value will be more dependent on a future recapitalization path more than just the basic announcement that this release showed.

After the earnings report a month ago, Morgan Stanley reiterated its Equal-Weight rating with a $10 target price. The firm said its earnings results were broadly in-line with estimates. The issue from Morgan Stanley was that its forward estimates continue to reflect some softening of the advertising market in 2025 from rising macro risks — and the firm saw WBD’s financial leverage representing a potential impediment to executing on strategic options.