ItsAValueTrap Posted March 14, 2013 Share Posted March 14, 2013 Has anybody put in the work to understand Liberty Media? Of all the Malone/Liberty companies, Liberty media seems to be the one to buy right now. It seems to be the one with the most insider buying / the least insider selling. As well, Malone's best investment ideas seem to be going into Liberty Capital and not Ventures. Ventures' retirement of its debt suggests that Malone isn't seeing a lot of good investment opportunities right now(?). Unfortunately, all of the Liberty companies tend to be brutally difficult to analyze. :/ Link to comment Share on other sites More sharing options...
jay21 Posted March 14, 2013 Share Posted March 14, 2013 I hope this thread does well. Another idea I see popping up is DTV, which I believe was also another Malone project. Also see this thread: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/liberty-media/ Link to comment Share on other sites More sharing options...
dcollon Posted March 14, 2013 Share Posted March 14, 2013 There has been a decent amount of discussion on this thread http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/liberty-media/ Link to comment Share on other sites More sharing options...
Ross812 Posted March 14, 2013 Share Posted March 14, 2013 Please, take a look at page 5 of the Presentation in attachment: if you buy into Liberty Media right now, you get a portfolio of companies valued at $11,202 million marked to market, as of December 31, 2012. Then you also have $1,420 million in cash. The $540 million of debt you see on the balance sheet in fact remained with Starz in the January 2013 separation. So, Liberty Media right now is debt free. Actually, as can be read on page 1 of the Press Release in attachment, Liberty Media had $1.8 billion in cash and no debt at the time of the spin-off. This leaves us with a portfolio worth $11.2 billion + $1.8 billion of cash = $13 billion of “liquidation” value. And market capitalization today is $12.93 billion. It means LMCA is trading for less than NAV, and you are getting Mr. Malone paramount skill for creating value completely for free. Imo, a good bargain! LMCA management seems to agree with me: from January 11, 2013 through January 31, 2013, barely 20 days, they repurchased $52.1 million worth of stocks at an average cost per share of $110.19. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Gio seems like he knows quite a bit about it. I started reading the Annual last week but haven't been able to get through it. There are so many moving parts that it is hard to get a handle on. Link to comment Share on other sites More sharing options...
dcollon Posted March 14, 2013 Share Posted March 14, 2013 It's probably worth incorporating a discussion on LYV, SIRI and BKS in here as well. Greg Maffei was just named Chairman of the Board at LYV after the close today. Link to comment Share on other sites More sharing options...
LC Posted March 14, 2013 Share Posted March 14, 2013 LMCA is one of those stocks I bought simply because Mr. Buffett has it in his portfolio. It's hard to value for the reasons everyone mentioned, and frankly I think Malone has designed his empire to be extremely hard to value. I think it has the potential to be a great business: great content assets, strong positioning in a consolidating industry, and distribution growth. But these alone would not be enough for me to invest because it is simple so hard to value. I think Malone wants only the investors that stick around to be the ones who trust him at the helm of this empire, not necessarily investors seeing undervalued asset prices. So the way I see it, if Mr. Buffett trusts Mr. Malone, then it's good enough for me. Link to comment Share on other sites More sharing options...
Ross812 Posted March 14, 2013 Share Posted March 14, 2013 Parsad, is there a way to merge the two threads? This thread and http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/liberty-media/ Link to comment Share on other sites More sharing options...
dcollon Posted March 18, 2013 Share Posted March 18, 2013 http://www.bloomberg.com/news/2013-03-18/liberty-said-to-buy-stake-in-charter-from-apollo-oaktree.html Link to comment Share on other sites More sharing options...
Olmsted Posted March 18, 2013 Share Posted March 18, 2013 http://www.bloomberg.com/news/2013-03-18/liberty-said-to-buy-stake-in-charter-from-apollo-oaktree.html Uggh this is painful. The warrants I bought post-reorg at $6 are now worth $59, and I didn't sell them for anything like $59... Link to comment Share on other sites More sharing options...
compoundinglife Posted March 18, 2013 Share Posted March 18, 2013 LMCA is one of those stocks I bought simply because Mr. Buffett has it in his portfolio. It's hard to value for the reasons everyone mentioned, and frankly I think Malone has designed his empire to be extremely hard to value. I think it has the potential to be a great business: great content assets, strong positioning in a consolidating industry, and distribution growth. But these alone would not be enough for me to invest because it is simple so hard to value. I think Malone wants only the investors that stick around to be the ones who trust him at the helm of this empire, not necessarily investors seeing undervalued asset prices. So the way I see it, if Mr. Buffett trusts Mr. Malone, then it's good enough for me. Datorama reports around 5M shares, so it is a Combs or Weschler holding not WEB. My guess would be Weschler but eh who knows. Link to comment Share on other sites More sharing options...
dcollon Posted March 18, 2013 Share Posted March 18, 2013 It's Ted Weschler. He owned it in his prior fund http://www.gurufocus.com/news/171049/new-berkshire-managers-combs-and-weschler-delivering-warren-buffettlike-returns Link to comment Share on other sites More sharing options...
Yours Truly Posted March 18, 2013 Share Posted March 18, 2013 Treat LMCA like Malone's personal hedge fund / PE company.... Personally, everything i've read about Malone is fantastic.. he practically turns everything he touches into GOLD... TCI, DTV, LMCA, Liberty Global, Liberty Interactive, Starz, Discovery and multiple financing of start-up content providers such as BET CHTR should do well with Malone's deep knowledge of the cable industry Link to comment Share on other sites More sharing options...
compoundinglife Posted March 18, 2013 Share Posted March 18, 2013 Interview with Malone's captain at LMCA/B: http://www.nytimes.com/2011/01/09/business/09corner.html?pagewanted=all&_r=0 Link to comment Share on other sites More sharing options...
giofranchi Posted March 19, 2013 Share Posted March 19, 2013 Thank you all for the insightful posts about Liberty Media! Anytime I think I know something about a company, I just have to come to this board to be humbled at once! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Link to comment Share on other sites More sharing options...
giofranchi Posted March 19, 2013 Share Posted March 19, 2013 Liberty Media invests in Charter Comunications. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard KeynesLMCA_News_2013_3_19_General_Releases.pdf Link to comment Share on other sites More sharing options...
dcollon Posted March 19, 2013 Share Posted March 19, 2013 • Charter (CHTR) announced that Liberty Media has entered into a definitive agreement with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire approximately 26.9M shares and approximately 1.1M warrants in Charter Communications, Inc. for approximately $2.617B, which represents an approximate 27.3% beneficial ownership in Charter and a price per share of $95.50. • Liberty expects to fund the purchase with a combination of cash on hand and new loan arrangements. • The transaction is expected to close in the first half of the second quarter of 2013 • Upon closing, funds managed by Crestview and Oaktree will hold approximately 7.4% and 2.2%, respectively, of Charter’s common shares. • Recall tha yesterday Bloomberg reported that LMCA and CHTR were near a deal • Charter entered into a stockholders agreement that among other things provides Liberty Media the right to designate up to four directors for appointment to the Charter board upon the closing of the transaction. o Liberty Media expects to designate John Malone, Chairman of Liberty Media; Gregory Maffei, President and CEO of Liberty Media; Nair Balan, EVP and CTO of Liberty Global; and Michael Huseby, CFO of Barnes & Noble • In addition, Liberty Media agreed to, among other things, not increase its beneficial ownership in Charter above 35% until January 2016 and 39.99% thereafter. • Liberty also agreed not to engage in proxy solicitations for nominations to Charter’s board of directors through the 2015 shareholder meeting and continue to so refrain as long as its designees are nominated to the Charter board or the agreement is earlier terminated Link to comment Share on other sites More sharing options...
Yours Truly Posted March 19, 2013 Share Posted March 19, 2013 • Charter (CHTR) announced that Liberty Media has entered into a definitive agreement with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire approximately 26.9M shares and approximately 1.1M warrants in Charter Communications, Inc. for approximately $2.617B, which represents an approximate 27.3% beneficial ownership in Charter and a price per share of $95.50. • Liberty expects to fund the purchase with a combination of cash on hand and new loan arrangements. • The transaction is expected to close in the first half of the second quarter of 2013 • Upon closing, funds managed by Crestview and Oaktree will hold approximately 7.4% and 2.2%, respectively, of Charter’s common shares. • Recall tha yesterday Bloomberg reported that LMCA and CHTR were near a deal • Charter entered into a stockholders agreement that among other things provides Liberty Media the right to designate up to four directors for appointment to the Charter board upon the closing of the transaction. o Liberty Media expects to designate John Malone, Chairman of Liberty Media; Gregory Maffei, President and CEO of Liberty Media; Nair Balan, EVP and CTO of Liberty Global; and Michael Huseby, CFO of Barnes & Noble • In addition, Liberty Media agreed to, among other things, not increase its beneficial ownership in Charter above 35% until January 2016 and 39.99% thereafter. • Liberty also agreed not to engage in proxy solicitations for nominations to Charter’s board of directors through the 2015 shareholder meeting and continue to so refrain as long as its designees are nominated to the Charter board or the agreement is earlier terminated Interesting tidbit: • In addition, Liberty Media agreed to, among other things, not increase its beneficial ownership in Charter above 35% until January 2016 and 39.99% thereafter. Either way, shareholders have to look forward for an eventual Charter and SiriusXM spin-offs in the future :) In essence, Charter replaces Starz! Link to comment Share on other sites More sharing options...
alwaysinvert Posted March 19, 2013 Share Posted March 19, 2013 I just don't get the valuation on SiriusXM... Sure, net subscriber additions now are very accretive to cash flows and they have a big untapped market, but still - the multiples are high, and growth as of now is not huge. Surely the idea of investing in LMCB at this moment in time doesn't make sense if you don't find SiriusXM at least fairly valued, but preferrably undervalued? Liberty won't exit the stock opportunistically because their cost basis for most of the shares is so low (would have to be a very high bid to make up for that), so their only way of avoiding to pay those taxes is a tax-free spinoff. At these prices Sirius falls in the too hard pile for me, and thus so does LMCB. Link to comment Share on other sites More sharing options...
giofranchi Posted March 19, 2013 Share Posted March 19, 2013 I just don't get the valuation on SiriusXM... Sure, net subscriber additions now are very accretive to cash flows and they have a big untapped market, but still - the multiples are high, and growth as of now is not huge. Surely the idea of investing in LMCB at this moment in time doesn't make sense if you don't find SiriusXM at least fairly valued, but preferrably undervalued? Liberty won't exit the stock opportunistically because their cost basis for most of the shares is so low (would have to be a very high bid to make up for that), so their only way of avoiding to pay those taxes is a tax-free spinoff. At these prices Sirius falls in the too hard pile for me, and thus so does LMCB. I think the article in attachment was good enough. Just give it a try! Of course, I am much more confident in Mr. Malone's ability to go on creating value, than in my grasping of the true worth of Sirius. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynessirius-xm-what-s-the-value-of-the-largest-radio-giant-on-earth.pdf Link to comment Share on other sites More sharing options...
alwaysinvert Posted March 19, 2013 Share Posted March 19, 2013 Yes, so they have about $3b worth of deferred tax assets on their books, of which almost 1/3 is deemed current and thus will likely get used this year, which indicates that they will be able to use these assets to get tax credits in full in 3 years (please, if I'm mistaken, correct me someone, we don't have the same rules here and you can't have negative income taxes in the same way, so I'm not very familiar with this). If I don't discount these at all and deduct them from current EV then we still have that number just a smidge below $20b with CFFO in 2012 of $800m, admittedly up significantly from the year before ($540m). Seems like a pretty high hurdle to grow into at attractive returns for the investor. But sure, if the growth numbers hold - 60% of new cars have SiriusXM capability. With an average of 16m cars being sold each year and 45% of the customers ending up purchasing the service, that would mean over 4m new customers each year in a normal car sales year (if we say that the car buyers aren't previous customers to any extent and with the big if that the conversion rate will hold). This would in and of itself offset the monthly churn rate of 1,9% and we keep the nice free option that is secondhand cars getting reactivated, which means pretty much free cashflows and that counts for a lot. On top of that the company seems to have untapped pricing power, evidenced by the unrocked churn rate after they raised prices (for the first time) by 12%. Still - I don't see it at current price levels. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted March 19, 2013 Author Share Posted March 19, 2013 I'm trying to understand Sirius. Since the merger: 1- Sirius XM may get more economies of scale? When they negotiate for content, the scale is important because they can squeeze the content owners. An upstart content provider (like Discovery, BET, etc. back in the day) would suddenly get access to a huge audience if they did a deal with TCI. So TCI would be able to negotiate very good rates from their content providers. 2- On the technology and operations side, there will be synergies. Eventually Sirius won't need as many satellites. Billing and paperwork will get consolidated, music stations will be duplicated on Sirius and XM, etc. 3- I have no idea what Internet radio will do to the industry. If you think that content is king, then maybe Sirius will become the #1 radio content provider. The producers of the best content may want to go with Sirius since they can make the most money with them. The subscription business model may be better than the advertising model. As far as subscription platforms go, Sirius XM may ultimately be the best because it offers satellite reception + you can stream Sirius on your smartphone. Sometimes smartphone reception is sketchy (?). --- ??? Maybe there is a growth story / See's Candies story here that people aren't catching onto. They will grow more subscribers due to increased penetration of satellite radios in cars. As their scale increases, their economies of scale will get better and they will make more money per subscriber. Adding fuel to this is today's low interest rate environment. Sirius' debt will get a lot cheaper. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted March 19, 2013 Author Share Posted March 19, 2013 Liberty won't exit the stock opportunistically because their cost basis for most of the shares is so low (would have to be a very high bid to make up for that), so their only way of avoiding to pay those taxes is a tax-free spinoff. Liberty's tax issues are always hard to understand for me. But I don't think that a tax-free spinoff will let them avoid paying taxes compared to no spinoff. The two separate entities plus the shareholders of those entities will still pay the same amount of tax to the US government. 2- There are different reasons why Liberty might do a spinoff: a- Because their debt allows it, and the debtholders get screwed when a spinoff happens. As a debtholder, you want your debt to be backed up by lots of assets. When Liberty splits up, your debt is less safe. This will allow Liberty to repurchase its debt cheaply. b- The spinoff companies can do things with their stock if it is over or underpriced. Underpriced stock --> buybacks. Overpriced stock --> mergers / use stock as currency. c- To get rid of tracking stock structures, which has some legal and audit costs. d- Malone loves leverage but doesn't want to get blown up so easily. So instead of having all his eggs in one basket, he has several different companies. If one business blows up, Malone doesn't go bankrupt. (Though Malone got margin called in 08/09 and sold stock when it was really cheap. This did not affect his publicly traded companies. Liberty Capital had liquidity and was able to make the homerun investment in Sirius in 2009.) Link to comment Share on other sites More sharing options...
Yours Truly Posted March 20, 2013 Share Posted March 20, 2013 Tons of new articles showing how amazing Malone is http://dealbook.nytimes.com/2013/03/19/malones-minority-report/ http://dealbook.nytimes.com/2013/03/19/in-charter-malone-returns-to-his-roots/ Not recent but good read http://dealbook.nytimes.com/2010/12/02/revisiting-the-great-diller-malone-feud/ Aside: has Malone failed in any of his ventures before? I read Cable Cowboy and couldn't find one investment where he just bombed.. That's unlike Rupert Murdoch just lost his marbles with the MySpace acquisition Link to comment Share on other sites More sharing options...
valueorama Posted March 20, 2013 Share Posted March 20, 2013 Aside: has Malone failed in any of his ventures before? I read Cable Cowboy and couldn't find one investment where he just bombed.. i dont think he totally bombed but the AT&T merger with TCI was a bomb. He did a stock merger with restrictions on him selling his stake. He saw his networth vaporize infront of his eyes. Here is the crazy stuff, he said he had a seat in the board and yet couldnt do anything as he was not controlling share holder. He sold his shares as soon as he satisfied the stipulations. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted March 20, 2013 Author Share Posted March 20, 2013 Wasn't there a Liberty Digital Ventures that kind of bombed? Though as valueorama pointed out, AT&T was the big one. Malone getting margin called was another failure. His Liberty Capital stock went up several times from where he sold it. (And I wasn't smart enough at the time to have bought it... even after reading Joel Greenblatt's book.) The margin call came after Cable Cowboy though. 2- If you're going to write a book about a famous person, would you write about how insignificant that person is? Probably not. You want to write a good story about this superinvestor guy who is the Darth Vader of the cable industry. There is going to be some storytelling bias. Though Malone is definitely one of the best investors/capital allocators out there. If you judge his success based on his net worth, then he is phenomenal. Link to comment Share on other sites More sharing options...
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