TLDR
- Skydance (SKYD) stock fell 24% on Wednesday to $7.06, after dropping as much as 29% in the morning.
- A warrant dividend went ex-dividend, and 470.7 million warrants now trade separately as SKYDWSWI at $2.39.
- Each warrant lets the holder buy one Class B stock at $12 for up to 10 years.
- Discovery+ now costs $6.99 (ad-supported) and $11.99 (ad-free) a month.
- Analysts rate the stock a Hold, with a $10.21 average price target.
Skydance (SKYD) stock closed Wednesday at $7.06, down 24% or $2.21. In the morning it fell as much as 29%, and the low of the day was $6.63.
Volume hit 92.5 million, nearly five times the 19.7 million average. At the worst point, about $2.19 billion in market value was gone.
The drop looks scary, but the cause is a warrant dividend. Skydance handed out 470.7 million warrants on Tuesday, one for every Class B stock held on Oct. 5.
Wednesday was the ex-dividend date. New buyers no longer get a warrant, so the stock price adjusted lower.
How the warrants work
Each warrant lets the holder buy one Class B stock at $12 for up to 10 years. The warrants trade on their own under the symbol SKYDWSWI.
At $2.39 each, they add up to about $1.1 billion in market value. That value now sits in a separate security.
The Ellison family, RedBird Capital and a few other controlling holders were left out. They did not receive any warrants.
The board can lower the $12 price or increase the number of stock each warrant buys. It cannot raise the price.
The stock traded near $6.80 at one point. It would need to rise 77% to reach the exercise price.
Debt was already a worry before Wednesday. Skydance has $78.9 billion of pro forma net debt.
Discovery+ gets pricier
Skydance also raised Discovery+ prices, only a week after the merger closed. The ad-supported plan goes from $5.99 to $6.99 a month.
The ad-free plan rises from $9.99 to $11.99. New subscribers pay the higher rates now.
Current subscribers get 30 days’ notice before the change hits their next bill. A source familiar with the situation said Warner planned the increase before the deal.
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, now serves as co-CEO. Some critics point to Matchbox: The Movie, which one report called one of the crummiest films of the year.
The stock is down 48% over the past year. Its 52-week range runs from $6.63 to $17.43.
Analysts rate Skydance a Hold, based on three Buys, five Holds and four Sells over the past three months. The average price target is $10.21, which implies 49% upside.
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