Why AT&T Stock Fell Hard Today | Nasdaq

What happened

Shares of AT&T (NYSE: T) plummeted this morning after Discovery Communications officially closed on the deal to acquire WarnerMedia from the telecom giant, creating a new company called Warner Bros. Discovery.

AT&T's stock was down by 19.2% as of 11:08 a.m. ET.

So what

It's not as if investors weren't aware that AT&T was selling WarnerMedia to Discovery -- the $43 billion deal was announced back in February -- but it's clear that some investors don't see a need to hold onto their AT&T shares now that the deal has officially closed.

Image source: Getty Images.

Warner Brothers Discovery now owns popular content and channels including the Discovery Channel, CNN, HBO, Warner Bros. Entertainment, and the Discovery+ and HBO Max streaming services.

AT&T investors aren't walking away empty-handed, though. As part of the deal, they received about 0.24 shares of the new Warner Brothers Discovery company for each share of AT&T common stock they had owned at the close of the deal.

The result of the spinoff gives AT&T shareholders ownership of 71% of the newly formed company, with Discovery shareholders holding the remaining 29%.

Now what

Current AT&T investors will now need to keep a close eye on the company's telecom business for future growth, instead of its media opportunities. And while the company's share price plunge today isn't a pleasant experience, the drop may be easier to swallow knowing that many pre-existing AT&T investors now have a stake in the new Warner Bros. Discovery company.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Discovery (C shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.