It has been awful time for investors in media company Warner Bros. Discovery (WBD -2.19%). Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down.

What's been going on and is now the time to sell out of the stock?  

Did certain investors sell without thinking about it?

When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry.

And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action.

Since the merger was structured so that AT&T would spin off its holding of WarnerMedia and then merge the company with Discovery, AT&T investors  got shares of the new company without doing anything. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do.

For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. Discovery, which has no dividend. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio.

Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. This might explain the initial fall in Warner Bros. Discovery's share price when the new company began trading earlier this year. However, Warner Bros. Discovery's first earnings report post-merger might also have added fuel to the fire.

Warner Bros. Discovery gave disappointing guidance

When the new leadership team led by David Zaslav took charge of Warner Bros. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. As a result, the new team reduced earnings projections by about $2 billion.

The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. Together,  these adverse developments impacted Warner Bros. Discovery's outlook for the year.

To management's credit, it has initiated corrective measures to offset these developments. Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. Overall, the company revised adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $9 billion and $9.5 billion for 2022, down from the $10 billion forecast before the merger.

Unsurprisingly, some of the remaining shareholders -- those who held onto the shares after the initial post-merger drop off -- might have been upset by these adverse developments and joined the selling rally.

Patience makes sense

A merger rarely goes without hiccups, so while the dip in Warner Bros. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run.

The management team has plenty of experience executing mergers. Just a few years ago, the same team acquired and integrated Scripps Networks  into Discovery. The same group is repeating its act again, albeit on a bigger deal.

Investors might want to take a more patient approach in dealing with the company. At least give management a few quarters to execute their strategies. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion .

After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto.