Already a member? Log In

Zaz-Adjusted EBITDA

Since the start of the WBD journey, according to David Zaslav, the company has paid down $12 billion of debt and is generating “over $5 billion in free cash flow” at the moment.
Since the start of the WBD journey, according to David Zaslav, the company has paid down $12 billion of debt and is generating “over $5 billion in free cash flow” at the moment. Photo: Axelle/Bauer-Griffin/FilmMagic
William D. Cohan
November 12, 2023

I’m not sure what spooked investors about Warner Bros. Discovery’s third-quarter earnings, but whatever it was sent the stock down 19 percent on Wednesday. Frankly, I don’t have any concern about WBD beyond its pre-existing challenges, many of which plague its whole industry: WBD has too much debt, too much leverage, a barely breakeven streaming business, and a linear TV unit suffering from a declining advertising market. This has been the story since the company was created in April 2022.

Since WBD started trading, its stock is down 59 percent. It now has a market value of around $25 billion and market capitalization of $68 billion, including $43 billion of net debt. And WBD will, justifiably, continue to struggle as an equity play as long as its leverage remains so high. No matter how you slice it—and even with a weighted average coupon of 4.6 percent, and with long-dated maturities—$43 billion is still a lot of debt. Heavy cake.