FuboTV Options Volume Jumps 10-Fold as Stock Soars After Disney Deal

Shares jumped 11% to $5.57 by noon Tuesday, extending its 251% surge the previous day when the deal was announced. Under the agreement, Fubo, which will own 30% of the combined virtual multichannel video programming (MVPD) company, will operate the new entity. Together, the two businesses that will merge will have a combined over 6.2 million subscribers in North America.

The transaction paves the way for a meaningful generation of earnings before interest, taxes, depreciation, and amortization (EBITDA), JPMorgan analysts including Nikhil Aluru said in a note yesterday.

"We view the transaction favorably as it resolves Fubo’s imminent balance sheet challenges, provides the business with more scale (and an improved EBITDA outlook), and offers the ability to package into a skinnier sports tier (reducing a key risk over time),"

The company has been burning cash since the fourth quarter of 2019, data compiled by Bloomberg showed. While losses are narrowing, the company still reported a negative adjusted EBITDA of $27.6 million in its latest financial results for the quarter that ended Sept. 30.

The fortune of the internet TV service provider is turning after the stock tumbled 60% last year, touching a record low of $1.10 in June. Shares that have been languishing below $2 since early last year are now up 282% in the first two days of the week. They traded at $5.32 at 12:52 p.m.

More than three-quarters of the volume so far seen across 12 expiration dates stretching through Jan. 15, 2027, are call options. The most popular contract linked to FuboTV is the call option that gives the holders the right to buy the stock at $7 by the end of next week. The price of those calls surged as much as 156% to $1.15 early Tuesday. The contract touched that intraday high when the share price rose to as high as $6.45, just 55 cents below the strike price.

As part of the deal, Disney, Fox, and Warner Bros. will pay a total of $220 million to Fubo, according to a press release Monday. Disney also committed to provide Fubo with a $145 million term loan as part of the deal, it stated.

The transaction "meaningfully resolves questions around Fubo's balance sheet and long-term viability," the JPMorgan analysts said. The cash payment from the transaction will boost Fubo's liquidity, they said.

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