Warner Bros Discovery rises after BofA says possible sale of assets likely beneficial

(Reuters) – Shares of Warner Bros Discovery rose more than 6% on Tuesday after Bank of America (BofA) Global Research said the company could create more value for its shareholders if it explored strategic options, including a potential sale.

The loss-making media conglomerate has been reeling from the effects of subdued advertising in the U.S. and certain international markets. The fallout of last year’s Hollywood strikes have also impacted the company’s studio segment.

Warner could explore a scenario where it could spin off its direct-to-customer and studio assets as a standalone company, BofA said in a note on Tuesday.

This could be a negative for Warner’s debt, but could be accretive to equity value, it added.

BofA added that Warner could explore selling itself or its streaming services could be merged with another streaming entity and potentially co-owned.

Since the merger between Discovery and AT&T spin-off Warner Media in 2022, shares of Warner Bros Discovery have fallen nearly 70%.

Warner did not immediately respond to a Reuters request for comment.

“While several financial assumptions behind the combination of Warner Media and Discovery have not materialized, we still believe several of WBD’s assets are best in class with tremendous unrecognized value,” BofA said.

Fears of market saturation have forced media companies to bundle their streaming businesses and offer discounted rates to attract customers who are wary of signing up and paying for numerous individual services.

Recent media reports also indicate that Warner could lose broadcasting rights for National Basketball Association in the next round of negotiations with distributors.

This could add to investor concerns about the media giant’s role in the new sports-streaming partnership with Disney and Fox.

(Reporting by Harshita Mary Varghese; Editing by Shailesh Kuber)

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