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Why Fubotv Stock Tripled Today
Shares of fuboTV (NYSE: FUBO), the struggling sports streaming service, were skyrocketing today after the company agreed to merge fuboTV with Hulu + Live TV, owned by Walt Disney (NYSE: DIS), under the fuboTV name and ticker.
FuboTV will own 30% of the new company, while Disney will own 70%.
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The investor response isn't surprising, as fuboTV had been struggling to turn a profit, and a merger seems like the best result for investors.
As of 12:16 p.m. ET, fuboTV stock was up an incredible 239%. Disney, meanwhile, ticked up 1.4%, showing investors approve of the deal from both sides.
Image source: Getty Images.
What the Hulu deal means for fuboTV
In addition to a 30% stake in the new business, fuboTV will receive a $220 million cash settlement payment from Disney, Fox, and Warner Bros. Discovery related to fuboTV's lawsuit against the proposed Venu Sports joint venture between Disney, Fox, and Warner Bros. that was set to be its own streaming sports service.
Disney will also provide a $145 million loan to fuboTV next year as part of the transaction, and fuboTV will get a $130 million termination fee if the deal is blocked by regulators. FuboTV's current management will continue to lead the new company, though the board of directors will be governed by a majority appointed by Disney.
What's next for fuboTV?
The deal dramatically transforms fuboTV and enhances the service, as it will be much more than sports, now including Hulu programming and the traditional cable channels that are part of Live TV.
The combined entities currently have 6.2 million North American subscribers and $6 billion in annual revenue, and the new business is expected to be cash-flow positive upon inception.
There's likely more consolidation ahead in the video streaming industry, as legacy media companies have struggled to transition to streaming. The combination could also help lead to a deal between ESPN and fuboTV when ESPN launches its flagship streaming service later this year, as Disney will likely want to make the new streaming ESPN service as compelling as it can be.
The deal is expected to close in 12 to 18 months, pending regulatory approval.
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Jeremy Bowman has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.
