LMCA - Liberty Media

[peter1234]

Here's the timeline:

 

Q3 2014

-- 1:4 distribution of the same class of Liberty Broadband (A, B, or C) that you hold in Liberty Media. 

-- Followed by 1:5 distribution of subscription rights for new Liberty Broadband Class C, at a 20% discount to the average trading price for 20 days after the spin.  Once the price has been set, the rights will be publicly traded.  Rights trading is expected to last 40 days. 

 

Starting with 20 LMCB, you would get:

40 LMCK non-voting Liberty Media Class C

5 Liberty Broadband Class B

10 Liberty Broadband Class C

3 Subscription Rights for new Liberty Broadband Class C

 

Thanks for summarizing.

 

Always amazing to see and understand the 'package'.

 

;)

[ItsAValueTrap]

There won't be any arbitrage on the rights offering.  Everything will be priced in.

 

Not everybody will exercise the rights though.  In the LVNTA situation, less than 1% failed to exercise their rights.  So if you opt for the over-allotment, you will get a tiny amount of free money.

 

Not to nitpick, but with a 20% discount on the rights that would be an arbitrage (by definition), but may only be profitable once, i.e. in the original spinoff.

 

To clarify:

 

1- The publicly-traded rights are kind of like deep-in-the-money call options.  (Except the rights cause dilution like warrants and call options don't.)

 

So you can arbitrage the rights against the common.

 

2- If you simply go long the rights and opt for the over-allotment option, you can make a tiny amount of free money.

[loganc]

To clarify:

 

1- The publicly-traded rights are kind of like deep-in-the-money call options.  (Except the rights cause dilution like warrants and call options don't.)

 

So you can arbitrage the rights against the common.

 

2- If you simply go long the rights and opt for the over-allotment option, you can make a tiny amount of free money.

 

As for (2) - This is going to depend on how the rights trade, yes?  It would be possible to pay a silly price for the right and get no "free money", as I see it.  I could be wrong. 

[ItsAValueTrap]

It depends on how many investors (e.g. retail) forget to exercise their rights.  In the LVNTA rights offering, I think more than 99% of rights holders exercised their rights.

[giofranchi]

(I already bought a small position.)

 

thought?

 

Thoughts??… Yeah! Sure!… I have bought a LARGE position!! ;D ;D

 

Gio

 

[investor-man]

65% drop in a single day for a John Malone company?  I don't follow LMCA. Anyone in the know have an explanation?

[gfp]

The stock is actually up 3.7% currently.  Distribution of a new class of stock.  Think of it like a stock split.

 

http://ir.libertymedia.com/releasedetail.cfm?ReleaseID=857882

[hardcorevalue]

when will the new broadband shares actually show up in my account?

[gfp]

It is my understanding that today was not the Broadband spin-off.  Today was the non-voting series C stock dividend (2 shares of C for each share of A or B).  Broadband spin is supposedly by the end of the year.

 

when will the new broadband shares actually show up in my account?

[hardcorevalue]

Ahh yes, i was confused thanks.

[investor-man]

The stock is actually up 3.7% currently.  Distribution of a new class of stock.  Think of it like a stock split.

 

http://ir.libertymedia.com/releasedetail.cfm?ReleaseID=857882

 

Makes sense. Was hoping for an awesome buying opportunity

[Ross812]

Does any one see a reason why a minority share holder with 1000 shares of lmca shouldn't trade them for 1040 shares of lmck?

[Munger_Disciple]

Taxes?

[Ross812]

In an IRA.

[thefatbaboon]

In an IRA.

 

Historically in Global, Discovery the discount between C and A shares has varied between 2% and 15%.  I'm in a similar situation to the one you describe but waiting for a better exchange ratio - there's no hurry.

[Liberty]

http://www.sec.gov/Archives/edgar/data/1611983/000104746914006379/a2220790zs-1.htm

 

The Liberty board of directors believes that the Liberty common stock is trading at a meaningful discount to the underlying value of Liberty's businesses and assets and has considered various restructuring alternatives, including the proposed tracking stock structure announced earlier this year, with a view to reducing this discount. By separating our assets and businesses from Liberty's other businesses, Liberty believes that the Spin-Off, as compared to the earlier proposed tracking stock structure, will better achieve Liberty's business objectives in reducing the complexity discount associated with its common stock, and Liberty believes that the Spin-Off will result in a higher aggregate trading value for our common stock and the Liberty common stock, as compared to the trading price of the Liberty common stock without the Spin-Off. Following the Spin-Off, Liberty expects that there will be greater transparency for investors with respect to our dominant business, Charter, and with respect to Liberty's dominant business, Sirius XM, which should result in greater focus and attention by the investment community on each of these businesses. The Spin-Off is also expected to enhance our ability and Liberty's ability to issue equity for strategic acquisitions and other business combinations by creating a more efficiently priced equity security in our common stock and Liberty's common stock, respectively, permit our company to raise capital, including through the rights offering, on more attractive terms than would be available in the absence of the Spin-Off, and enable us and Liberty to more effectively tailor equity incentives for our management and employees with less dilution to public stockholders.

 

In addition, earlier this year Liberty submitted a proposal to Sirius XM to acquire all of the shares of Sirius XM that it did not already own in exchange for Liberty common stock. This proposal was withdrawn before Sirius XM could respond. Should a combination with Sirius XM be pursued in the future, the Spin-Off should facilitate such a transaction by removing the Broadband Assets and Liabilities and creating a purer-play company with a more efficiently-priced acquisition currency. Similarly, Liberty believes that the Spin-Off may also help to facilitate a potential combination of our company with Charter if one were pursued.

[loganc]

http://www.sec.gov/Archives/edgar/data/1611983/000104746914006379/a2220790zs-1.htm

 

The Liberty board of directors believes that the Liberty common stock is trading at a meaningful discount to the underlying value of Liberty's businesses and assets and has considered various restructuring alternatives, including the proposed tracking stock structure announced earlier this year, with a view to reducing this discount. By separating our assets and businesses from Liberty's other businesses, Liberty believes that the Spin-Off, as compared to the earlier proposed tracking stock structure, will better achieve Liberty's business objectives in reducing the complexity discount associated with its common stock, and Liberty believes that the Spin-Off will result in a higher aggregate trading value for our common stock and the Liberty common stock, as compared to the trading price of the Liberty common stock without the Spin-Off. Following the Spin-Off, Liberty expects that there will be greater transparency for investors with respect to our dominant business, Charter, and with respect to Liberty's dominant business, Sirius XM, which should result in greater focus and attention by the investment community on each of these businesses. The Spin-Off is also expected to enhance our ability and Liberty's ability to issue equity for strategic acquisitions and other business combinations by creating a more efficiently priced equity security in our common stock and Liberty's common stock, respectively, permit our company to raise capital, including through the rights offering, on more attractive terms than would be available in the absence of the Spin-Off, and enable us and Liberty to more effectively tailor equity incentives for our management and employees with less dilution to public stockholders.

 

In addition, earlier this year Liberty submitted a proposal to Sirius XM to acquire all of the shares of Sirius XM that it did not already own in exchange for Liberty common stock. This proposal was withdrawn before Sirius XM could respond. Should a combination with Sirius XM be pursued in the future, the Spin-Off should facilitate such a transaction by removing the Broadband Assets and Liabilities and creating a purer-play company with a more efficiently-priced acquisition currency. Similarly, Liberty believes that the Spin-Off may also help to facilitate a potential combination of our company with Charter if one were pursued.

 

This is awesome.

[giofranchi]

This is awesome.

 

And it is the reason I have a large position. :)

 

Gio

 

[ItsAValueTrap]

As of March 31, 2014 Broadband had a cash balance of $13.1 million. In addition, Broadband had cash of $60.4 million invested with Liberty, under the terms of an intercompany note agreement. Additionally, in connection with the Spin-Off, Broadband intends to enter into a $320 million credit arrangement pursuant to which it is expected that Broadband will borrow $300 million prior to the completion of the Spin-Off and will have $20 million available to be drawn following the Spin-Off (see "Description of Our Indebtedness"). Pursuant to the internal restructuring, and prior to the Spin-Off, it is anticipated that Broadband will distribute $300 million in cash to Liberty. Liberty intends to use all of the distributed proceeds received from Broadband to repay indebtedness or to repurchase shares of Liberty common stock under its share repurchase program, pursuant to a special authorization by Liberty's board of directors, within twelve months following the completion of the Spin-Off.

http://www.sec.gov/Archives/edgar/data/1611983/000104746914006379/a2220790zs-1.htm#dm79001_selected_financial_data

[dwy000]

Just gets better and better......

[jay21]

In an IRA.

 

Historically in Global, Discovery the discount between C and A shares has varied between 2% and 15%.  I'm in a similar situation to the one you describe but waiting for a better exchange ratio - there's no hurry.

 

Actually, you might want to do it before the distribution, right?  Unless, we assume the discount will be the same between the Broadband shares and LMC shares?

[netnet]

 

 

Actually, you might want to do it before the distribution, right?  Unless, we assume the discount will be the same between the Broadband shares and LMC shares?

 

Correct me if you mean something else, but they are separate companies or will be.

 

 

Also, has anybody finished analyzing the July 24th S1?  I'm not going to be able to get to it before next weekend.

 

 

[ItsAValueTrap]

They will be separate companies.  It will be a spinoff, not a tracking stock.

[jay21]

 

 

Actually, you might want to do it before the distribution, right?  Unless, we assume the discount will be the same between the Broadband shares and LMC shares?

 

Correct me if you mean something else, but they are separate companies or will be.

 

 

Also, has anybody finished analyzing the July 24th S1?  I'm not going to be able to get to it before next weekend.

 

I mean something else.

 

LMCA will convert into Broadband A and LMC C shares will convert into Broadband C.  If you switch from LMCA into LMC C, you would gain more shares and increase the gross amount of Broadband shares you will receive.  So you may want to make the switch.  However, if the Broadband A shares trade at the same premium to the Broadband C shares as the LMCA trades to LMC C, then maybe it doesn't matter.

[Ross812]

 

 

Actually, you might want to do it before the distribution, right?  Unless, we assume the discount will be the same between the Broadband shares and LMC shares?

 

Correct me if you mean something else, but they are separate companies or will be.

 

 

Also, has anybody finished analyzing the July 24th S1?  I'm not going to be able to get to it before next weekend.

 

I mean something else.

 

LMCA will convert into Broadband A and LMC C shares will convert into Broadband C.  If you switch from LMCA into LMC C, you would gain more shares and increase the gross amount of Broadband shares you will receive.  So you may want to make the switch.  However, if the Broadband A shares trade at the same premium to the Broadband C shares as the LMCA trades to LMC C, then maybe it doesn't matter.

 

Good catch on the broadband series C vs A shares. The only advantage I see in switching to all C shares is for the increase in subscription rights. The subscription rights may not be exercised though and off of 1000 LMCA shares you can only trade for 1040 LMCK shares which would give you 260 Broadband C Shares instead of 250 Broadband A shares but only increases your subscription rights by 2 shares which is probably not worth the trading costs at the end of the day.