Warner Bros. Discovery's latest strategic move could lead to a spin-off

Shares of Warner Bros. Discovery (NASDAQ:WBD ) saw a significant rise of 17% on Thursday following the announcement of a new corporate structure, suggesting a strategic move that could potentially lead to a spin-off. The media giant will now operate with two distinct divisions under its umbrella.

The restructuring introduces the Global Linear Networks division, which will handle the company's premier linear television business, including well-known networks that feature a mix of news, sports, and both scripted and unscripted programming. The second division, Streaming & Studios, will focus on expanding its globally scaled streaming platform and manage its film and entertainment studios renowned for a vast array of popular intellectual property.

BofA analysts view this organizational change as a positive step towards unlocking the unrecognized value of Warner Bros. Discovery's assets. Despite challenges in the financial projections post the merger of Warner Media and Discovery, analysts maintain confidence in the intrinsic value of the company's assets. They anticipate that this new structure will provide the flexibility necessary for future strategic maneuvers, such as a potential spin-off of the streaming and studio assets.

Bloomberg Intelligence hinted that the management's decision indicates a possible future separation of the units, although they noted the difficulty of such an operation given that 85% of the company's profit is currently tied to its legacy TV business.

Vital Knowledge echoed similar sentiments, stating that the move aligns with trends in the media industry and could lead to exploration of options for the assets. However, they also pointed out the challenge Warner Bros. Discovery faces due to the significant portion of cash flow and earnings still generated by the linear television business, which could complicate efforts to divest these assets.

The announcement has sparked interest in the company's next steps as it adapts to the evolving media landscape and seeks to enhance shareholder value through strategic reorganization.

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Source: Investing.com