Disruptions from an ESPN Spinoff Could Outweigh Benefits for Disney -- Market Talk
Dow Jones
While arguments could be made for a potential spinoff of ESPN by Disney, it could have a disruptive effect on the company's cash generation as well as its other assets that could potentially outweigh the strategic rationale of such a move, analysts at BofA Securities say in a research note.
A possible spinoff at the moment would result in selling at a trough multiple given secular headwinds in cord-cutting coupled with multiple compression across the industry, the analysts say, making it unclear how much public-market appetite there would be for a standalone cable network.
Additionally, linear networks/ESPN, while declining, still generate an overwhelming portion of the entertainment and theme-park company's total cash flow and is helping to fund its transition to direct-to-consumer. Shares fall 1.6% to $97.49.