LMCA - Liberty Media

[txlaw]

It's important that we remember Malone bought most of his Sirius position for nothing.  He then topped up in order to get control.  We can not assume that Malone thinks Sirius (and by extension Liberty) is a "buy" at current prices.  And tax matters make monetization very expensive for Liberty - so Sirius would have to be very over-valued for Malone to want to eat the tax from a straight sale. 

 

I don't know. He's having Sirius do huge buybacks, was doing LMCA buybacks until recently (probably keeping powder dry for cable deals), and he recently tried to swallow the whole of Sirius by issuing new shares. I don't think he thinks it's overvalued.

 

I've never done a valuation on SIRI, so I can't really speak to whether or not it is undervalued or overvalued or fairly valued. 

 

However, I don't think Malone-inspired buybacks by SIRI necessarily means that it is not overvalued for non-Malone investors.  Buybacks, after all, are a tax efficient way to get a nice incremental return on a control investment if you don't want to take a tax hit.  Even if the buyback results in a 5% reinvestment return for SIRI and LMCA/Malone, he would probably rather take that than redeploy elsewhere in a tax paying manner, even if he views SIRI as a business that runs off over time. 

 

As to LMCA issuing stock to buy SIRI, but also having done buybacks prior, it's hard to say whether that is good evidence that SIRI was undervalued or fairly valued by the bid.  I think Malone just tends to like to redeploy capital into his controlled situations, rather than the WEB/Munger way of deploying capital into their number one opportunity, whether controlled or not.  And I don't know how the debt ratios worked with the proposed deal, but it's possible that Malone just had to use stock as the currency in order to keep the debt to EBITDA ratio acceptable to the lenders.

[txlaw]

Content is terrified about how to go OTT.  I've talked to a number of fairly senior executives in content companies and the current strategy being followed by nearly everyone is "divide and confuse".  Lot's of different time windows, different delivery channels, different collators. With the idea that you seed new revenue streams without killing any golden geese.  But obviously you're right that this could evolve. 

 

Don't disagree with you there.  Just take a look at the Disney/Dish deal to see that with OTT, the bundle ain't going away immediately.

 

I just wouldn't count on SIRI keeping its entire portfolio and competitive advantages intact after deals start expiring.  Particularly since monetization strategy will become more clear over time for the content owners.  Sports leagues are the biggest threat, I think, long term.  For now, they will continue to expand their audiences by doing distribution deals globally.  But at some point, the distributors have to be worried that the leagues will figure out how to go direct, perhaps with the help of non-traditional partners (e.g., big tech). 

 

A few other thoughts...

 

First, everyone who wants free music can already get free music.  So that's not new. 

 

Second,  if you want commercial free music you need to pay and at the moment Sirius royalty agreement means they have less than half the content costs of streaming services. 

 

Third, "talk" is very important for Sirius customers, probably more so than music, and here is a little niche where Sirius seems quite protected.  Many of the big content/tech guys wouldn't want to start a talkshow management business, the smaller content/tech guys can't pay as well as Sirius, and going it alone is ok if the host doesn't want to make any real money (a la podcast) or if he is super famous (a la Stern).  Thus, Sirius seems to be in a good position to continue to attract and lock up talk personalities.

 

I think the issue is that you can substitute a paid music service like Spotify or Rdio for Sirius-XM, and it's not entirely clear that Sirius-XM listeners won't switch given a certain price and the different type of functionality.  Additionally, even though Sirius-XM has a cost advantage, that doesn't insulate it from pricing pressure and reduced margins.

 

As to the "talk radio" portion, that could very well be one of the true value adds in SIRI's portfolio where. they might retain a moat. 

 

Again, I have to say that I have never done a deep dive SIRI analysis, so I am not really opining on valuation.  I am just noting how the market is changing in way that will make SIRI's biz environment much more competitive.

[thefatbaboon]

The lmca share repurchase in the fall last year was an asset swap with comcast.  lmca had some minority participations in comcast + cash and comcast had some lmca stock.  One can only infer that malone didn't think the shares were overvalued relative to the minority participations + cash.  If memory serves the participations were valued at 13x ebitda.

 

And I'm in agreement with txlaw with regard to the sirius buybacks. I think one can assume that malone doesn't think Sirius is over valued.  Other than that I don't think one can assume anything - and there is a big space between "good buy" and "over-valued".  Malone is a levered fcf investor.  Sirius borrowed 10 yr at 6%.  So long as the growth adjusted unlevered fcf yield is greater than 6% then the buyback is accretive.  That's probably not the hurdle you guys have in mind when you think something is a good buy.  (If you want to see this in another context look at Discovery - which is especially telling because Malone has had half of his personal shares collared for the last couple years and yet the company has bought back shares hand over fist). 

 

 

[loganc]

SIRI did a connected car deal with Ford:

 

http://investor.siriusxm.com/releasedetail.cfm?ReleaseID=855681

 

 

[thefatbaboon]

Free streaming music from Tmobile, will not count toward data caps.

 

 

T-Mobile Is Now Offering Free iPhones, Free 4G, and Free Music

BY TIM MOYNIHAN  06.19.14  |  1:33 PM  |  PERMALINK

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tim-tmobile-01

Tim Moynihan/WIRED

 

From a business perspective, T-Mobile’s recent tactics seem downright insane. From a consumer’s perspective, they make a lot of sense. Therein lies the point.

 

More than ever, the third-place U.S. carrier seems intent on leapfrogging at least one half of the AT&T/Verizon “duopoly.”

 

To prove it, the company’s latest “Un-Carrier” gambit involves offering free phones, free service, and free music streaming as a way to entice new customers to come over to the light side. At Wednesday evening’s event at the Paramount Theater in Seattle, CEO John Legere announced that T-Mobile will be (temporarily) giving away iPhone 5Ses and free service for a week as part of its Test Drive promotion, which begins Monday.

 

“It’s about transforming an outdated industry,” Legere explained during his announcement. “If the other guys do what we’re doing, I don’t give a shit. I’ll celebrate because we changed the industry.”

 

As part of the company’s new deals, anyone can sign up for a “Test Drive” on T-Mobile’s web site starting Monday. The process involves entering a credit card number, but Legere said cards wouldn’t be charged or used to pay a deposit to get a loaner phone. Once signed up, customers would be shipped an iPhone 5S to use free of charge for a week, just as long as they return the phone to a T-Mobile store after seven days.

 

MusicFreedomscreenshotGS5FINAL_low

T-Mobile

The company has partnered with Apple for the limited-usage free phones. Although the official library due-date is seven days, T-Mobile Chief Operating Officer Mike Sievert says there is a day of wiggle room and that phones with a ding on them are OK to return without a penalty.

“Bang on our network for a week,” said Sievert. “Then bring it into store when you’re done.”

 

According to Legere, the idea behind the promotion is that no one really knows how good T-Mobile’s network is; it’s the “fastest nationwide 4G LTE network” with “more network capacity per user,” according to the CEO. He’s hoping real-world usage will open everyone’s eyes to what he describes as an advertising whitewash.

 

“The media spending in our industry is $6 billion,” Legere said in his presentation, referring to advertising from AT&T, Verizon, and Sprint. “That creates this cacophony of the biggest bullshit in history. This is how America makes wireless decisions.”

 

Legere and T-Mobile aren’t just putting their network up for mass judgment, they’re also making data-hogging content available without risk of overage charges. For music fans, it’s an attractive deal.

 

Test_Drive_Box_low

T-Mobile

T-Mobile also announced that music streaming from several services will not count against monthly data caps. Any music streamed from Pandora, Spotify, iTunes Radio, iHeartRadio, Rhapsody, Slacker, Milk Music, and Beatport will not count against users’ data plans. According to T-Mobile, those services represent 85 percent of music streams in the U.S., but a few popular services—Beats Music, Rdio, and Google Play Music—are not part of the protected data plan. Through its site, T-Mobile will let users vote on the next service to be part of the “Music Freedom” mix.

“Even when you exhaust your data bucket, you can stream your music at high speed,” said Sievert. “Our network can handle it. Streaming music is a showcase of what makes T-Mobile different.”

 

As for the free loaner phones, they’re limited to iPhone 5Ses for now. Legere frequently jabbed at Amazon’s just-announced Fire Phone, jokingly referring to it as “that hologram phone” several times during the announcement.

[giofranchi]

that's the thing about malone and other great investors. there is no playbook.

 

You are talking about me?? Yes, of course you are talking about me!! “John and Gio”… I love the sound!! ;D ;D ;D

 

Gio

[saltybit]

seems like Malone just sold some LMCA:

http://ir.libertymedia.com/secfiling.cfm?filingID=1225208-14-15638&CIK=1560385

[ItsAValueTrap]

I started looking into TruePosition's new CEO Craig Waggy.  His past bothers me.

 

1- Here is his bio from TruePosition's website:

 

Craig Waggy joined TruePosition in 2005, serving as the Executive Vice President of Finance and Administration from 2005 to early 2014.

 

Prior to joining TruePosition, Mr. Waggy served as Senior Vice President and Chief Financial Officer of OpenTV Corp. (Nasdaq: OPTV) and Liberty Broadband Interactive Television, where he was responsible for overseeing the finance, accounting, tax, human resources, information technology and facilities organizations. He previously held the position of Senior Vice President and Chief Financial Officer at TV Guide, Inc. (formerly United Video Satellite Group) (Nasdaq: UVSGA, prior to its acquisition by Gemstar-TV Guide International, Inc.)

 

Mr. Waggy is a CPA and graduate of the University of Kansas, where he earned both Master of Science and Bachelor of Science degrees in Accounting.

 

2- Craig and Liberty have a long history together.

 

Craig Waggy (CFO) and Peter Boylan (CEO) were involved in United Video Satellite Group, Inc. which Liberty invested in.  This became TV Guide and was later merged with Gemstar.  Liberty then traded the Gemstar shares with Rupert Murdoch.

 

The two eventually became involved in Liberty Broadband Interactive Television, which was a partnership between Liberty and Peter Boylan.  I believe that LBIT is now defunct.

 

Here's Liberty's press release announcing LBIT:

http://www.prnewswire.com/news-releases/liberty-media-corporation-to-create-liberty-broadband-interactive-television-inc-lbit-with-peter-c-boylan-iii-as-president-and-ceo-77324582.html

 

3- After Craig Waggy and Peter Boylan left Gemstar, it would later be discovered that some of the accounting was improper.  Here is a SEC document for Waggy, who paid a $25k civil penalty:

https://www.sec.gov/litigation/admin/2006/34-54099.pdf

 

Craig Waggy was the CFO for OpenTV Corp.  After he left, the company revealed that it had material deficiencies in its internal controls. 

 

From the YE2004 10-K:

http://www.sec.gov/Archives/edgar/data/1096958/000095012305003247/y06663e10vk.htm

 

(...) our management identified material weaknesses in our internal control over financial reporting as of December 31, 2004.

      Certain duties within our financial group, which has the responsibility for preparing our financial statements, were not properly segregated. In the fourth quarter of 2004, we determined that our controller had the ability to direct other personnel within the finance group to initiate and enter manual journal entries in the company’s books and records without authorization or review by other members of the financial organization. After identifying this weakness, we introduced new procedures in the first quarter of 2005 requiring that our Chief Financial Officer review any and all non-recurring journal entries with a value of $100,000 or more and also required that our Chief Financial Officer review all journal entries that are directed by our controller, including those below $100,000. We believe that the remediating and compensating controls that we initiated in the first quarter of 2005 have effectively remediated this weakness.

 

The 10-K does not mention any improper behaviour on Waggy's part.  But somebody must have been responsible for the material weaknesses - either the new CEO or the old CEO (Waggy).  But given Waggy's short tenure....

[Liberty]

http://glennchan.wordpress.com/2014/06/30/lmca-is-there-hidden-value-in-trueposition/

[giofranchi]

Morgan Stanley sees value play in Liberty Media • 8:27 AM

 

Morgan Stanley upgrades Liberty Media (LMCA) to an Overweight rating and sets a $158 price target on the media concern.

The investment firm likes the potential value unlocked by the spinoff of Liberty Broadband.

 

 

Gio

[Guest ajc]

 

A slidedeck presentation from Luma Partners on the future of TV.

 

http://www.businessinsider.com/luma-partners-on-the-future-of-tv-2014-7?op=1

 

 

 

[Guest JoelS]

Interesting presentation. Thank you for posting.

[giofranchi]

Liberty Media Corp. Announces When-Issued Trading and Trading Symbol Information in Connection With Upcoming Distribution of Series C Common Stock

 

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- Liberty Media Corporation (Nasdaq: LMCA and LMCB) ("Liberty") has been advised by Nasdaq that, in connection with Liberty's upcoming issuance of shares of its Series C common stock by means of a dividend (the "Dividend"), the Series C common stock will trade on a when-issued basis on the Nasdaq Global Select Market under the symbol "LMCKV" from July 8, 2014 through July 23, 2014. Shares of Series C common stock are expected to be issued to holders of record of Liberty's Series A common stock and Series B common stock as of 5:00 p.m., New York City time, on July 7, 2014. However, because Nasdaq has established July 24, 2014 as the ex-dividend date for the Dividend, and as a result of related "due bill" trading procedures, persons acquiring shares of Liberty's Series A common stock and Series B common stock in the market through July 23, 2014 will still receive shares of Series C common stock in the Dividend. Liberty currently anticipates that the payment date for the Dividend will be 5:00 p.m., New York City time, on July 23, 2014. Liberty expects that the Series C common stock will begin trading in the regular way on the Nasdaq Global Select Market under the symbol "LMCK" beginning on July 24, 2014.

 

 

Gio

 

 

[phil_Buffett]

iam really new to the liberty camp. Holding Shares since two months.

 

i dont understand the dividend Topic. we will get 200 Shares of LMCA C Shares.

 

they are actually LMCKV. trading right now at 45$. if i get two Shares of it and have my old Shares of LMCA this would be a yield of almost 100%  :o. this cant be true or? i have to miss something, but dont get it. hopefully someone of you can explain it to me :)

 

thanks and cheers

 

phil

[giofranchi]

iam really new to the liberty camp. Holding Shares since two months.

 

i dont understand the dividend Topic. we will get 200 Shares of LMCA C Shares.

 

they are actually LMCKV. trading right now at 45$. if i get two Shares of it and have my old Shares of LMCA this would be a yield of almost 100%  :o. this cant be true or? i have to miss something, but dont get it. hopefully someone of you can explain it to me :)

 

thanks and cheers

 

phil

 

Not sure… But I guess LMCA on July 24 will drop…?

I admit this is not easy to follow… Though I believe at the end of the spin-off we will be left with more money than at the beginning… It has almost always worked out that way! ;D

 

Gio

 

[LongTerm]

 

i dont understand the dividend Topic. we will get 200 Shares of LMCA C Shares.

 

they are actually LMCKV. trading right now at 45$. if i get two Shares of it and have my old Shares of LMCA this would be a yield of almost 100%  :o. this cant be true or? i have to miss something, but dont get it. hopefully someone of you can explain it to me :)

 

See Gio's post below. You receive your C shares only on July 24. Until that time the LMCA shares trade with the right to receive the 2 shares of LMCK (the Dividend). The LMCA shares should reprice to around the same price as the LMCK shares (perhaps with a slight premium as they have a vote... but perhaps not) after the Dividend. Effectively you will have 3 shares for every LMCA share you now own, 1 LMCA share and 2 LMCK shares. They should all trade for about 1/3 of the current price of the LMCA shares after the Dividend date.

[phil_Buffett]

 

i dont understand the dividend Topic. we will get 200 Shares of LMCA C Shares.

 

they are actually LMCKV. trading right now at 45$. if i get two Shares of it and have my old Shares of LMCA this would be a yield of almost 100%  :o. this cant be true or? i have to miss something, but dont get it. hopefully someone of you can explain it to me :)

 

See Gio's post below. You receive your C shares only on July 24. Until that time the LMCA shares trade with the right to receive the 2 shares of LMCK (the Dividend). The LMCA shares should reprice to around the same price as the LMCK shares (perhaps with a slight premium as they have a vote... but perhaps not) after the Dividend. Effectively you will have 3 shares for every LMCA share you now own, 1 LMCA share and 2 LMCK shares. They should all trade for about 1/3 of the current price of the LMCA shares after the Dividend date.

 

thanks LongTerm. now i got it :)

[loganc]

SIRI adds 2B to the buyback authorization:

 

http://investor.siriusxm.com/releasedetail.cfm?ReleaseID=859950

 

 

[netnet]

Correct me if I am wrong, but I don't think buying to a Malone split up/off, etc. has ever been a bad idea.

 

On this one, it looks like a reasonable position just to get the rights to the 20% off, which should be a nice arbitrage at the least.

 

(I already bought a small position.)

 

thought?

[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.

[valueorama]

Correct me if I am wrong, but I don't think buying to a Malone split up/off, etc. has ever been a bad idea.

 

On this one, it looks like a reasonable position just to get the rights to the 20% off, which should be a nice arbitrage at the least.

 

thought?

 

What rights are you talking about? As per the press release from LMCA, we will be getting a dividend. In this case, the dividend so happens to be Stock instead of the usual cash dividend. Stock dividends are not taxable event.

[racemize]

Correct me if I am wrong, but I don't think buying to a Malone split up/off, etc. has ever been a bad idea.

 

On this one, it looks like a reasonable position just to get the rights to the 20% off, which should be a nice arbitrage at the least.

 

thought?

 

What rights are you talking about? As per the press release from LMCA, we will be getting a dividend. In this case, the dividend so happens to be Stock instead of the usual cash dividend. Stock dividends are not taxable event.

 

I believe he is talking about the upcoming broadband rights, not the recent stock dividend.

[netnet]

Correct me if I am wrong, but I don't think buying to a Malone split up/off, etc. has ever been a bad idea.

 

On this one, it looks like a reasonable position just to get the rights to the 20% off, which should be a nice arbitrage at the least.

 

thought?

 

What rights are you talking about? As per the press release from LMCA, we will be getting a dividend. In this case, the dividend so happens to be Stock instead of the usual cash dividend. Stock dividends are not taxable event.

 

With Malone things are often complicated, but there is a rights offering with the spinoff.

stockholders will also receive a subscription right to acquire one share of Series C Liberty Broadband common stock for every five shares of Liberty Broadband common stock they receive in the spin-off.

from May 8th press release.

[Guest JoelS]

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

[netnet]

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.