TLDR
- Skydance (SKYD) stock fell 24% on Wednesday to $7.06, and dropped as much as 29% at the low.
- A warrant dividend went ex-dividend. Holders got one warrant per Class B stock, and the 470.7 million warrants are worth about $1.1 billion combined.
- Each warrant lets the owner buy one Class B stock at $12 for up to 10 years.
- Discovery+ prices rose to $6.99 (ad-supported) and $11.99 (ad-free) a month.
- Analysts rate the stock a Hold with a $10.21 average price target, which implies 49% upside.
Skydance (SKYD) stock fell 24% on Wednesday to $7.06, a drop of $2.21. At the low, it was down as much as 29%.
The slide erased as much as $2.19 billion in market value at the bottom. Volume reached 92.5 million, well above the 19.7 million average.
The main cause was a warrant dividend, not a business problem. The reason is boring, and that is the point.
On Tuesday, Skydance gave out 470.7 million warrants to Class B holders of record on Oct. 5. Each holder got one warrant for every Class B stock they owned.
What the warrants are
The Ellison family, RedBird Capital and a few other controlling holders were left out. Those holders received no warrants.
Each warrant lets the owner buy one Class B stock for up to 10 years at $12. The board can lower that price or raise the number of stock each warrant buys, but it cannot raise the price.
The warrants trade separately under SKYDWSWI. At $2.39 each, they add up to about $1.1 billion.
Wednesday was the ex-dividend date, so new buyers no longer get a warrant. That is why the main stock repriced lower.
At one point the stock traded near $6.80. It would need to climb 77% to reach the $12 exercise price.
Skydance also carries $78.9 billion of pro forma net debt. That load was there before Wednesday.
Discovery+ prices go up
Skydance also raised prices on Discovery+ only a week after its merger closed. The ad-supported plan rises from $5.99 to $6.99 a month.
The ad-free plan goes from $9.99 to $11.99 a month. New subscribers pay the new rates now.
Current subscribers get 30 days’ notice before the change hits their next bill. A source familiar with the situation said Warner had planned the increase before the merger.
Skydance plans to fold HBO Max and Paramount+ into one service. Discovery+ is the first to see a price change.
Ynon Kreiz, the former Mattel CEO, is now co-CEO. Some critics have questioned his record after Matchbox: The Movie, which one report called one of the year’s worst.
The stock is down about 48% over the past year. Its 52-week range runs from $6.63 to $17.43.
Analysts rate Skydance a Hold, with three Buys, five Holds and four Sells over the past three months. The average price target is $10.21, which implies 49% upside.
