Warner Bros. Discovery (WBD) is set to split into two companies by separating its legacy cable business from its streaming and studios operations. This split is also delivering a heavy blow to CEO David Zaslav, as his salary is set to be reduced following the move. However, his new compensation includes attractive stock options that could be worth more than $150 million if the company reaches certain share price milestones.
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The new pay structure will take effect only if the split is completed by the end of 2026. Meanwhile, Zaslav received stock options for 21 million shares last week, with the underlying value already exceeding $200 million. Zaslav is considered one of the highest-paid CEOs on Wall Street, and while making the decision to split the company, the board insisted that Zaslav continue as CEO of the streaming and studios unit.
Zaslav’s Salary Hit by Company Split
According to the new pay structure, Zaslav will continue to earn $3 million in regular salary, but his target bonus will be significantly reduced to $6 million, down from the $22 million target bonus he had last year. The new bonus will have a cap of $12 million, nearly half of the $23.9 million payout he earned last year.
Additionally, the CEO would receive $15.5 million in equity awards in the first year after the split, followed by $7.5 million annually thereafter. If Zaslav remains in his role, 40% of the options would vest over five years, with the rest vesting in tranches. Notably, if all milestones are met, he could earn more than $150 million in shares from the grant over the five-year period. Moreover, Zaslav’s stock options would continue to vest even if the streaming business is sold or if Zaslav is asked to leave.
The media giant made the bold decision to split its business because the legacy cable TV division was dragging down overall performance. The split will result in the creation of two publicly listed entities, with the studios and HBO Max streaming division separating from its cable networks. Last week, WBD’s bondholders approved the split by a majority vote. Under the new structure, most of the outstanding debt will be tied to the cable business, while the streaming and studio units will take on less debt to better compete in the market.
Is WBD Stock a Good Investment?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on 10 Buys and eight Holds assigned in the past three months. Furthermore, the average WBD price target of $12.31 per share implies 16.3% upside potential from current levels.
