DISCA/DISCK - Discovery Communications

[scorpioncapital]

To put it in perspective it's still hovering around modest lows with the bump, same price as almost 7 years ago :)

 

[CorpRaider]

Yeah still looks cheap if things work out, but not in the habit of buying following ~+25% moves.  ;D

[gfp]

John Malone purchased additional shares in the market yesterday - David Faber had discussed him buying shares in the most recent interview -

 

https://www.sec.gov/Archives/edgar/data/937797/000120919117065687/xslF345X03/doc4.xml

 

Looks like 6.5 million dollars worth

[Jurgis]

Assuming DIS integrates FOX well, both DISCA and LBTYA will have a bigger competitor...

[gfp]

Another 2 million bucks from Malone -

https://www.sec.gov/Archives/edgar/data/937797/000120919117065979/xslF345X03/doc4.xml

 

and 1.8 million from a director -

https://www.sec.gov/Archives/edgar/data/1082013/000120919117065981/xslF345X03/doc4.xml

[CorpRaider]

Just saw a banner add on Bloomberg promoting the post merger combined entity with a link to the corporate/IR website.  Anyone else see it yet?  Pretty big turnoff for me and ground for removal from my watch list.  Like STFU and pay down your debt so you can buyback your stock below intrinsic value if you think it's such a great bargain, don't spend shareholder funds to try and pump it up.

[scorpioncapital]

What connection is there between a banner ad and the real world ability to raise your share price materially by pointing it to your IR page? :) Companies can't even raise their share price with actual large buybacks sometimes.

[CorpRaider]

Will likely be ineffectual, I agree.  I'm just trying to keep the BS-ometer well tuned.

 

It is promoting the discovery and its global reach.  I thought it could be targeted at cable carriers or something but it references them owning their content and reaching more viewers globally, which I think would be more targeted at investors. 

 

 

 

 

 

 

[racemize]

From the twitterverse:

$DISCA - I guess that T/TWX decision made him rather bullish - 1.4million shares in open market worth ~$33million https://ir.corporate.discovery.com/node/14601/html

[DooDiligence]

From the twitterverse:

$DISCA - I guess that T/TWX decision made him rather bullish - 1.4million shares in open market worth ~$33million https://ir.corporate.discovery.com/node/14601/html

 

Nice find.

 

He says he's not interested in marrying content & distribution & yet...?

Maybe he's just anticipating someone else who IS interested in marrying content & distribution?

[dwy000]

Or at $20 he might just like the 7-8 cash flow price!

[HalfMeasure]

From the twitterverse:

$DISCA - I guess that T/TWX decision made him rather bullish - 1.4million shares in open market worth ~$33million https://ir.corporate.discovery.com/node/14601/html

 

Tuesday purchase was majority of the shares are would've come before the T/TWX decision unless he somehow got a big block after hours.

[Jurgis]

From the twitterverse:

$DISCA - I guess that T/TWX decision made him rather bullish - 1.4million shares in open market worth ~$33million https://ir.corporate.discovery.com/node/14601/html

 

Tuesday purchase was majority of the shares are would've come before the T/TWX decision unless he somehow got a big block after hours.

 

Maybe he did the same thing people did with TWX: bought before decision.

[UK]

https://www.cnbc.com/2018/09/12/cnbc-exclusive-cnbc-transcript-discovery-president-and-ceo-david-zaslav-speaks-with-cnbcs-david-faber-today.html

[dwy000]

Malone is up 40% in 3 months on his open market purchase.  Once again showing why he is the greatest media investor ever.

[Jurgis]

Netflix hitting DISCA content: https://www.worldwildlife.org/pages/our-planet?link=vid&utm_campaign=our-planet&utm_medium=email&utm_source=engagement&utm_content=190204-ed

[scorpioncapital]

I haven't looked at the licensing agreements but YouTube might be a good platform for discovery and Scripps do it yourself content.

[Spekulatius]

Netflix hitting DISCA content: https://www.worldwildlife.org/pages/our-planet?link=vid&utm_campaign=our-planet&utm_medium=email&utm_source=engagement&utm_content=190204-ed

 

^ That was discovery channels content 10 years ago. Discovery channel content now are scripted shows like “Deadliest catch”, “Bootleggers” etc. There aren’t really many documentaries to be found in Discovery channels lineup.

[mwtorock]

https://www.sec.gov/Archives/edgar/data/1437107/000120919119056842/xslF345X03/doc4.xml

 

Malone bought more (a lot more) shares in DISCK. Followers please :)

 

I think it is a great idea to follow Malone btw.

[argonaut]

This purchase is not quite straightforward as he also did a option collar -- looking out up to 8 years. If I am reading it correctly it's a bullish play? To those who know more of these items view it as protection for some of his 10MM shares or is it a separate play meant to add some additional upside without having to layout cash for another 3MM shares?

[Munger_Disciple]

This purchase is not quite straightforward as he also did a option collar -- looking out up to 8 years. If I am reading it correctly it's a bullish play? To those who know more of these items view it as protection for some of his 10MM shares or is it a separate play meant to add some additional upside without having to layout cash for another 3MM shares?

 

It is a mildly bearish or somewhat neutral transaction. Malone bought 2.67M shares and simultaneously entered into a "collar" transaction on 3.65M shares he owns. The collar is a short call with strike of $35.79 and a long put with a strike of $25.23. So in effect he is buying some protection by giving up some upside on a portion of his holding.

[mwtorock]

This purchase is not quite straightforward as he also did a option collar -- looking out up to 8 years. If I am reading it correctly it's a bullish play? To those who know more of these items view it as protection for some of his 10MM shares or is it a separate play meant to add some additional upside without having to layout cash for another 3MM shares?

 

It is a mildly bearish or somewhat neutral transaction. Malone bought 2.67M shares and simultaneously entered into a "collar" transaction on 3.65M shares he owns. The collar is a short call with strike of $35.79 and a long put with a strike of $25.23. So in effect he is buying some protection by giving up some upside on a portion of his holding.

 

I am not sure it leans towards bearish in this case. If he want just protection, he could have only done the zero cost collar. There is no need to buy additional 2.67m shares. Really no need to lay out 75m dollars for a put protection of 1m shares.

 

A speculation could be that he put up 3.65m shares as collateral for something, and might need to hedge that.

[wabuffo]

FWIW - my own 2-cents is that Malone is mildly bullish about DISCK (now that they've started buying back stock again after a hiatus to pay down debt from the Scripps acquisition from July, 2017).  I think Malone had said back then that DISCK would stop the buyback until they could pay down debt to a comfortable level and then they would start up their repurchase program again - which they just did.  That's why he's buying now (post-quiet period from the quarterly earnings).

 

When Malone buys for his own portfolio, he uses margin pretty aggressively.  My theory is that he took on a cashless collar to hedge because he's on margin.  He is in effect minimizing his cash outlay in every way possible (margin, downside protection, cashless hedges).  His only cost is he's giving up a bit of the upside - but that's an opportunity cost.

 

wabuffo

[Munger_Disciple]

FWIW - my own 2-cents is that Malone is mildly bullish about DISCK (now that they've started buying back stock again after a hiatus to pay down debt from the Scripps acquisition from July, 2017).  I think Malone had said back then that DISCK would stop the buyback until they could pay down debt to a comfortable level and then they would start up their repurchase program again - which they just did.  That's why he's buying now (post-quiet period from the quarterly earnings).

 

When Malone buys for his own portfolio, he uses margin pretty aggressively.  My theory is that he took on a cashless collar to hedge because he's on margin.  He is in effect minimizing his cash outlay in every way possible (margin, downside protection, cashless hedges).  His only cost is he's giving up a bit of the upside - but that's an opportunity cost.

 

wabuffo

 

Malone may be mildly bullish on DISCK but the transaction by itself is mildly bearish I think. The net result is that he is short 1M shares. He hates paying taxes so he would rather not sell 1M shares today and so he is posting postponing any sell decision to 2027 due to European options while getting some downside protection + some upside to current price in the meantime. 

[Munger_Disciple]

Thinking a bit more about it, I now see it as a mildly bullish transaction. Let us just look at the 3.65M shares that are affected by the collar minus the purchase cost for the 2.67M additional shares.

 

Case 1: DISCK goes to $35.79 and Malone gets called. The he walks away with $55.8M net (=35.79*3.65-2.67*28.03). If never entered into this transaction, then his current 1M shares would be worth $35.8M.

 

Case 2: DISCK goes to $50 and Malone gets called. Then he still walks away with $55.8M net. If never did this transaction, his take on the 1M shares is only $50M.

 

Case 3: DISCK goes to $0 and Malone puts his shares for $25.23. He walks away with $17M (=$25.23*3.65-2.67*$28.03). If he never did this transaction, his take would be worth $0 on the unhedged 1M shares.

 

Of course, he could have also entered into a hedging collar on just the 1M shares w/o buying an additional 2.65M shares in which case his upside would be $35.8M and his downside would be $25.23M.

 

So he increased his upside while slightly increasing his downside relative to collar on only the 1M shares he already owns. Therefore the overall transaction is mildly bullish.