Will AT&T spin off WarnerMedia?

AT&T, Inc. ( NYSE: T) today announced that its board of directors has determined to spin off AT&T’s interest in WarnerMedia in connection with the previously announced transaction with Discovery, Inc (NASDAQ: DISCA, DISCB, DISCK).

What happens to AT&T on the day of the spin-off?

Here is how the math of that works out. On the day of the spin-off, the price of AT&T will fall automatically. It has to fall since a good portion of the assets of the company “spin-off” into a new company, Warner Bros Discovery. In fact, AT&T shareholders will receive 71% of the total number of shares, and Discovery shareholders will receive 29%.

Is AT&T's merger with WarnerMedia tax-free?

AT&T wrapped up its merger with WarnerMedia and ... [+] On December 28, 2021, AT&T Inc. T +0.9% (NYSE: T, $25.64, Market Capitalization: $183.1 billion) announced that the company had received a favorable ruling from the IRS, signaling the deal to combine WarnerMedia with Discovery DISCA 0.0% would be tax-free for shareholders.

What will AT&T's final dividend look like after the spin-off?

However, given that the value of the spin-off could take $6 to $7 off of the post-spinoff price of AT&T, its final dividend will be closer to 6.0% to 6.3%. Here is how the math of that works out. On the day of the spin-off, the price of AT&T will fall automatically.