DISCA/DISCK - Discovery Communications

[hasilp89]

Fair point I could have probably left that out. My belief is there is an overemphasis of legacy business destruction from big tech which DISCK gets lumped into, and I don’t believe it will necessarily play out that way.

[Broeb22]

I do think Roku makes the likelihood of something like D+ having a place in the world.

I'm reminded of the quote Malone (or somebody) had about the content world where the content gets bundled and unbundled then rebundled. Roku is turning into that rebundling concept which puts them in an interesting spot. But the bundler has an incentive to add options to their bundle to justify their own existence. If people could get everything they wanted from one or two streaming channels, then why does the bundler need to exist? So there is a real argument for Roku and other aggregators giving these 2nd or 3rd tier streaming platforms a place in the world.

What do the economics of that arrangement look like for a D+? I don't know, maybe they're not bad. Are they as good as cable was?

[thefatbaboon]

Personally I have been very happy with the app numbers so far.  Much much better than i was expecting.  To be the top entertainment app after 5 weeks from launch on Google play and the top entertainment app on Amazon, above Netflix, above Disney, above Tubi and HBO!  And to still be top ten on iOS.  Lets see how month two goes but it looks very promising so far!

[adhital]

Not excited by the reviews here

https://www.amazon.com/Discovery-Plus-Learning-Digital-Premieres/dp/B087G5BN7Z
 
Insider sale is not encouraging either

https://www.secform4.com/insider-trading/1437107.htm

But I’m hoping they do well.. bought around low 20s and recently sold all my position

[dwy000]

Not excited by the reviews here

https://www.amazon.com/Discovery-Plus-Learning-Digital-Premieres/dp/B087G5BN7Z
 
Insider sale is not encouraging either

https://www.secform4.com/insider-trading/1437107.htm

But I’m hoping they do well.. bought around low 20s and recently sold all my position

The insider sales were a couple of months ago, long before the launch so I doubt it had anything to do with that.  Also, Malone sold 5 different company shares in 10 different transactions within the same 10 days in December. Almost certainly tax and estate planning.

[thefatbaboon]

Not sure what review you are linking to either adhital, seems to be an old indian version.  Here is the actual app page on amazon, its nearly equal in 5* rating (78%) to Netflix (82%) and Disney (81%).  And higher rated than every other video entertainment app on Amazon.

https://www.amazon.com/Discovery-Communications-discovery-Stream-Shows/dp/B08F8XQLQZ/ref=pd_rhf_se_p_img_3?_encoding=UTF8&psc=1&refRID=Q2NGK34QP91EJZ5F1BE3

[hasilp89]

to the point on reviews - i've been scanning twitter and other sources. i think the main gripe i'm seeing is people upset that they used to have these shows on cable and now they have to pay for a separate service. That's growing/industry pains to me. The folks who still haven't cut the cord yet that are finally having to get there. Otherwise the app works very well, good UI etc.

[adhital]

Not sure what review you are linking to either adhital, seems to be an old indian version.  Here is the actual app page on amazon, its nearly equal in 5* rating (78%) to Netflix (82%) and Disney (81%).  And higher rated than every other video entertainment app on Amazon.

https://www.amazon.com/Discovery-Communications-discovery-Stream-Shows/dp/B08F8XQLQZ/ref=pd_rhf_se_p_img_3?_encoding=UTF8&psc=1&refRID=Q2NGK34QP91EJZ5F1BE3

I was reading the most liked actual reviews/feedback, seem to be from the real audience, and didn't pay attention to the app version.. my apologies. Reviews and Inside sale is not the reason for investing; however, IRR and free cash flow yield at this price don't seem that compelling to me as it was in the low 20s. That doesn't mean DISCA can't be a multi-bagger given it's return on equity vs, cost of capital and capital structure in general. 

[hasilp89]

didn't get a chance to listen in but saw headline number of 11m+ subs (12m by month end). 40M shares bought back in low 20s. realized investment in FUBO TV. OIBIDA down 10% and FCF down 25%. 

[Grossbaum]

Does anyone have any insight into the large difference in Discovery’s A shares and K shares? Currently, there is about a $10/share difference – while the 6 year average is about a $2/share difference.

Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision?

My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value.

The A shares seem to be somewhat more liquid with a 15 day average daily volume of 7.9m shares vs 5.1m shares for the K shares. This doesn’t seem do be a large enough difference in liquidity to drive such a wide difference in valuation. The K shares seem plenty liquid.

The passive index funds (SPY/IVV) own both series of shares, related to the market cap of each series.

The spread widened dramatically during the same time as Wall Street Bets related stocks rallied, specifically on Jan 27th. So, perhaps it is just retail buying. Maybe arbs that normally would correct the mispricing are a bit tentative because of Wall Street Bets stock rallies? This is just speculation. 

The Company has been directing it’s repurchase program exclusively to the K shares recently.

Discovery Inc – Total Shares Outstanding (at Feb 8, 2021)
Series A (DISCA)      163m
Series B (DISCB)       6.5m
Series C (DISCK)     318m
Pref Stock Conv.      165m
Total                         652m