Warner Bros. Discovery Stock Crumples to All-Time Lows After Huge Q2 Impairment Charge

Posted by Jenniffer Sheldon on Thursday, July 25, 2024

UPDATED: Shares of Warner Bros. Discovery slid more than 12% in early trading Thursday to all-time lows after the media conglomerate — heavily reliant on its pay-TV business — announced a whopping $9.1 billion write-down reflecting the loss of value of its linear television networks.

WBD shares were down as low as $6.73 per share Thursday (-12.7%), coming after the company’s second-quarter 2024 earnings report after market close. The stock closed Aug. 8 at $7.02 per share, down 9%.

The stock’s lowest closing price was on June 18, 2024, when it ended the day at $6.99 per share; its 52-week low intraday price previously was $6.94 (on June 20). Year to date, Warner Bros. Discovery shares are now down 40%.

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The stock drop wiped out more than $1.6 billion of market value, with Warner Bros. Discovery’s market capitalization standing at about $17.2 billion as of close of trading Thursday. That’s compared with more than $50 billion following the closing of Discovery’s acquisition of WarnerMedia in April 2022.

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When companies are forced to write down goodwill (an amount above the fair market value of an asset), they reduce that value from their balance sheets and record an expense on their income statement for the loss. Such a move reflects management’s acknowledgement that initial projections for investments or acquisitions fell well short of projections. WBD said the triggering events for the goodwill impairment for its TV networks in the second quarter of 2024 were “uncertainty” about NBA rights, which the company is poised to lose starting with the 2025 season, as well as “continued softness” in the linear ad market.

The cratering stock, the disappointing Q2 earnings, the massive debt load and the company’s loss of the NBA will put more pressure on CEO David Zaslav to find a strategy — and fast — to right the ship.

“In light of industry headwinds, we have and will continue taking bold steps, like reimagining our existing linear partnerships and pursuing new bundling opportunities, with the goal to get Max on the devices of more consumers faster and at a fraction of the acquisition cost,” Zaslav said in prepared remarks about the Q2 earnings.

Last month, Warner Bros. Discovery laid off almost 1,000 employees in a new bid to pare down costs. There could be an M&A event on WBD’s horizon — similar to the deal Skydance Media negotiated that would see it merge with Paramount Global (which also operates a business weighted toward TV).

Zaslav, speaking at an investment conference this spring, said Warner Bros. Discovery will be “opportunistic” in seeking M&A deals in the next two or three years. “There are a lot of players that are losing a lot of money,” he said. “There’ll be some players that want to get out of the business, that will look to consolidate their streaming businesses with others.”

At Allen & Co.’s retreat last month in Sun Valley, Idaho, Zaslav said he was in favor of whichever presidential candidate could cut through government red tape and ease the way for M&A. “We just need an opportunity for deregulation, so companies can consolidate and do what we need to be even better,” he said.

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