The price to be paid, very roughly if I recall, is $27, with about some of it coming in the form of NFLX shares (I think a minority amount).
But…there is also the thing about the split of the linear assets. NFLX is only taking the studio and HBO.
So…if I sell my shares when it reaches $27 - that is my bet, it will eventually get there to reflect the cash and the stock offer (and if it doesn’t need to get to $27 in terms of trading ahead of the stock issuance, please correct me) - before the split, will I still be on record to receive whatever compensation comes down the line from that split, or do I need to continue to own the shares to eventually realize that value? Hope I am clear enough in my question. Thanks in advance…
Warner Brothers Global Networks (linear+misc parts) shares that will exist once they are spun off of WBD.
WBD (studio+library+etc) shares that will exist for a very short time on paper after the deal goes through, and will be swapped for cash+NFLX shares at that point.
Which shares are you referring to? And when do you intend to sell them?
If say the stock rises to $27 in the next week or so (if it does), I would want to sell now, because I believe the RemainCo - the linear - will be around $2/$3. Call it $3. That would add up to the roughly $30 the total deal is supposed to represent for shareholders.
I sort-of want to cash out now and not wait two years so I can book my substantial profit (substantial for me, anyway, probably not for many of you; %-wise it is well over 100%) and rotate to other names. I suppose I could and not worry about the rest given the value of time, but I guess it is in the back of my mind that I won’t get everything I could get. Yet, I wondered if I would still be on record even after selling that I am owed the couple bucks for the linear portion.
If you sell now, then you aren’t part of the deal … because the deal will happen in the future (probably late 2026). You can choose to sell all your WBD shares today (at about $26.XX) and then you don’t own any WBD, nor do you own any of its successors or spin offs or any of its potential other distributions in the future.
Many people choose to “sell on the news” (rather than waiting for the deal to actually occur) because they believe that the bulk of the gains are already part of the current trading value. They aren’t willing to hold for longer just for a few more percent potentially. It’s not a bad strategy (especially if you have somewhere better to put the realized capital), but it does sometimes miss out on higher bids if there is a bidding war of sorts.
Thanks for that explanation. Based on what you said, I am getting close to just selling now.
But, as I’m sure you’ve heard, PSKY has just launched a hostile bid for all of WBD at $30 per share, so let me ask a follow-up if that’s okay.
Let’s say the bid is accepted, and the board changes its mind and goes with it - in theory, would that mean, since it is all-cash for all of the company, the stock could trade up to the full value immediately, maybe $29 if there is a discount for time for regulatory review? As I write, the stock is up 7% to over $28. Which, now that I write that, is getting close to my sell point; if it goes to $29, I might just sell, I guess. But it’s good to know theoretically what might happen. (I wonder if NFLX would be willing to raise their offer, or CMCSA; I wonder too why Ellison doesn’t just raise it to $32 or higher or something like that, I assume legally the board would have to accept that)
It could do any number of things. It could trade up to the current bid of $30, or as you say a bit lower than that to account for the potential risk that a deal doesn’t go through (financing issues, regulatory issues, force majeure, etc). It could remain lower if too many people believe that the $27 deal will happen eventually. Or it could trade higher than $30 if people think there may be other bidders who are willing to pay more, or that there may be a former bidder that is willing to increase their bid.
The way I understand it is that this deal is a little complicated and the two bids are not directly comparable. One, because first first bid is for only part of the entity, while the second bid is for the entire company. And two, because the first bid is part cash part shares, and the second bid is all cash (backed by someone wealthy enough to provide all the cash if necessary). There are a lot of wrinkles when it comes to competing bids.
I’d recommend deciding what price you want, and take it when it appears. You may not get top dollar, but you will get it quicker and can redeploy that capital elsewhere. You also need to decide which year you want that capital gain to be incurred, 2025 or 2026.