LMCA - Liberty Media

[merkhet]

market is valuing Braves about 650m right now but sure is better than the nothing it was valuing it before.

 

Remember, there's a $200 million rights offering that's going to impact the valuation a bit.

[merkhet]

I think we might be on to something here with Liberty.

 

To me LMCA, LMCB, LMCK are the new trackers for Liberty. The old Liberty stock "disappeared" as it was split into these trackers, and the old tickers were adopted by the new Liberty trackers. I get new Liberty's market cap as of now to be 1.51 B USD.

 

Liberty Braves and Liberty SiriusXM are more pure-plays, Liberty is the mixed bad. From IR investor FAQ:

"The Liberty Media Group consists primarily of Liberty Media Corporation’s interest in Live Nation Entertainment, Inc., our other public company minority investments including Time Warner, Inc. and Viacom Inc., and an approximate 20% inter-group interest in the Liberty Braves Group."

 

I don't know what that inter-group interest is, but if it's worth 25 % (1/5) of BATRA market cap (BATRA being remaining 4/5), that would be 160 M of its current market valuation. But I can't be sure what that means.

 

I also think it's ridiculous that the S-4 was made based on Q3 and not Q4 numbers. In fact I don't know how much assets, equity and liabilities Liberty now has. Especially, on the S-4 I read that Live Nation ownership share was 27 %, but apparently "a forward contract" took this up to 34.4 % by December.

 

Live Nation's Q3 balance sheet value of 395 M (out of 1,077 M) seems to relate to that 27 %. I assume that rest of Q3 equity, e.g. AFS securities that we shown at fair market values of 533 M and "Other" equity method investments of 164 M are still roughly the same. With higher Live Nation ownership now both equity and liabilities are probably up, who knows what has happened to NAV.

 

Also, is the Vivendi 420 M post-tax settlement coming to only Liberty, or split pro-rata among all trackers? It was ruled before the split, but the cash has not arrived yet, and I guess Liberty represents the old "parent" most likely to get the money.

 

Most of your questions can be answered by the Investor Day presentation. http://files.shareholder.com/downloads/ABEA-4CW8ZW/1600465407x0x861474/78C0F42B-18BD-4D9B-B35E-854E84830685/2015_-_liberty_media_corp_investor_day.pdf

[scorpioncapital]

Settlement going to media group.

The added increase in Live Nations is down about $2 and change from year-end (look at the 10-K) and the cost basis increases of course to about 800m vs 400m. All in all, not much change.

The discount seems to have widened at Media vs the other 2 trackers - today anyway. Obviously they tracked out their crown jewel but still, I think the discount is too big if you feel Live Nations is fairly valued.

[bonkers]

Thanks, Merkhet and Scorpion! Got it.

 

To me it seems that the discount is smallest with Sirius, clearly larger with Liberty and perhaps largest with Braves, where the assets are hardest to value. Now thinking of it, such an outcome only seems logical.

[usdtor05]

Thanks, Merkhet and Scorpion! Got it.

 

To me it seems that the discount is smallest with Sirius, clearly larger with Liberty and perhaps largest with Braves, where the assets are hardest to value. Now thinking of it, such an outcome only seems logical.

 

The discounts right now are as follows:

 

1. LSXMK - 16% (assuming net debt is 200) NAV - $12.1B, MC - $10.2B

 

2. Braves - 12% NAV - $1b (nets rights offering at today's price less 20% against the interco) and MC - $901M adjusted for $200M rights

 

3. Media - 11.4% - NAV - $1.6B MC - $1.7B

[scorpioncapital]

Ok, so I think I see we have 340m shares plus potential 21 million that are not considered due to anti-dilution. This is pre-tracker breakout.

 

Then this line,

 

"Additionally, contemporaneously with the issuance of the Convertible Notes, Liberty entered into privately negotiated cash convertible note hedges and purchased call options (the “Bond Hedge Transaction”). The Bond Hedge Transaction covered approximately 5,588,200 shares of Liberty Series A common stock, subject to anti-dilution adjustments pertaining to the Convertible Notes, which was equal to the number of shares of Liberty Series A common stock that were initially underlying the Convertible Notes. The Bond Hedge Transaction is expected to offset potential cash payments Liberty would be required to make in excess of the principal amount of the Convertible Notes, upon conversion of the notes in the event that the volume-weighted average price per share of the Liberty Series A common stock, as measured under the cash convertible note hedge transactions on each trading day of the relevant cash settlement averaging period or other relevant valuation period, is greater than the strike price of $178.95 per share of Liberty Series A common stock, which corresponded to the initial conversion price of the Convertible Notes. During the year ended December 31, 2014, in connection with the issuance of Liberty Series C common stock and the Broadband Spin-Off, as discussed in note 1, the number of shares covered by the Bond Hedge Transaction was adjusted to 21,085,900 shares of Liberty Series A common stock and the strike price was adjusted to $47.43 per share of Liberty Series A common stock, which corresponds to the adjusted conversion price of the Convertible Notes. Liberty paid approximately $299 million for the Bond Hedge Transaction. The bond hedge expires on October 15, 2023 and is included in other long-term assets as of December 31, 2015 and 2014 in the accompanying consolidated balance sheets, with changes in the fair value recorded in the Unrealized gains (losses) on financial instruments, net line item of the statements of operations.

 

Concurrently with the Convertible Notes and Bond Hedge Transaction, Liberty also entered into separate privately negotiated warrant transactions under which Liberty sold warrants relating to the same number of shares of common stock as underlie the Bond Hedge Transaction, subject to anti-dilution adjustments. The warrant transactions may have a dilutive effect with respect to the Liberty Series A common stock to the extent that the price of the Liberty Series A common stock exceeds the strike price of the warrant transactions and warrant transactions are settled with shares of Liberty Series A common stock. The first expiration date of the warrants is January 16, 2024 and expire over a period covering 81 days thereafter. Liberty may elect to settle its delivery obligation under the warrant transactions with cash. Liberty received approximately $170 million in proceeds for the sale of warrants. The issuance of the warrants were recorded as a component of Additional paid-in capital. The strike price of the warrants was initially $255.64 per share of Liberty Series A common stock. In connection with the Series C common stock issuance and the Broadband Spin-Off during 2014, as discussed in note 1, the number of warrants outstanding was adjusted to 21,085,900 with a strike price of $64.46 per share. "

 

Reading this makes my head ache. I am trying to figure out if what they have done is in fact offset the 20 million shares in the post-tracker structure so that it's all included and there will be no dilution or if there is a potential 5 million (post tracker split) dilution to LMCA in 2024.

 

[jgyetzer]

 

The discounts right now are as follows:

 

1. LSXMK - 16% (assuming net debt is 200) NAV - $12.1B, MC - $10.2B

 

2. Braves - 12% NAV - $1b (nets rights offering at today's price less 20% against the interco) and MC - $901M adjusted for $200M rights

 

3. Media - 11.4% - NAV - $1.6B MC - $1.7B

 

Does your LMCA NAV estimate include the Vivendi payment?  When I include that I arrive at slightly over $2B valuation.

[yitech]

Thanks, Merkhet and Scorpion! Got it.

 

To me it seems that the discount is smallest with Sirius, clearly larger with Liberty and perhaps largest with Braves, where the assets are hardest to value. Now thinking of it, such an outcome only seems logical.

 

The discounts right now are as follows:

 

1. LSXMK - 16% (assuming net debt is 200) NAV - $12.1B, MC - $10.2B

 

2. Braves - 12% NAV - $1b (nets rights offering at today's price less 20% against the interco) and MC - $901M adjusted for $200M rights

 

3. Media - 11.4% - NAV - $1.6B MC - $1.7B

 

I think discount for LSXMK is only 11.5% since you need to compare (12.1B-0.2B) vs 10.6B. Margin debt has the first claim over SIRI.

[dwy000]

Ok, so I think I see we have 340m shares plus potential 21 million that are not considered due to anti-dilution. This is pre-tracker breakout.

 

Then this line,

 

"Additionally, contemporaneously with the issuance of the Convertible Notes, Liberty entered into privately negotiated cash convertible note hedges and purchased call options (the “Bond Hedge Transaction”). The Bond Hedge Transaction covered approximately 5,588,200 shares of Liberty Series A common stock, subject to anti-dilution adjustments pertaining to the Convertible Notes, which was equal to the number of shares of Liberty Series A common stock that were initially underlying the Convertible Notes. The Bond Hedge Transaction is expected to offset potential cash payments Liberty would be required to make in excess of the principal amount of the Convertible Notes, upon conversion of the notes in the event that the volume-weighted average price per share of the Liberty Series A common stock, as measured under the cash convertible note hedge transactions on each trading day of the relevant cash settlement averaging period or other relevant valuation period, is greater than the strike price of $178.95 per share of Liberty Series A common stock, which corresponded to the initial conversion price of the Convertible Notes. During the year ended December 31, 2014, in connection with the issuance of Liberty Series C common stock and the Broadband Spin-Off, as discussed in note 1, the number of shares covered by the Bond Hedge Transaction was adjusted to 21,085,900 shares of Liberty Series A common stock and the strike price was adjusted to $47.43 per share of Liberty Series A common stock, which corresponds to the adjusted conversion price of the Convertible Notes. Liberty paid approximately $299 million for the Bond Hedge Transaction. The bond hedge expires on October 15, 2023 and is included in other long-term assets as of December 31, 2015 and 2014 in the accompanying consolidated balance sheets, with changes in the fair value recorded in the Unrealized gains (losses) on financial instruments, net line item of the statements of operations.

 

Concurrently with the Convertible Notes and Bond Hedge Transaction, Liberty also entered into separate privately negotiated warrant transactions under which Liberty sold warrants relating to the same number of shares of common stock as underlie the Bond Hedge Transaction, subject to anti-dilution adjustments. The warrant transactions may have a dilutive effect with respect to the Liberty Series A common stock to the extent that the price of the Liberty Series A common stock exceeds the strike price of the warrant transactions and warrant transactions are settled with shares of Liberty Series A common stock. The first expiration date of the warrants is January 16, 2024 and expire over a period covering 81 days thereafter. Liberty may elect to settle its delivery obligation under the warrant transactions with cash. Liberty received approximately $170 million in proceeds for the sale of warrants. The issuance of the warrants were recorded as a component of Additional paid-in capital. The strike price of the warrants was initially $255.64 per share of Liberty Series A common stock. In connection with the Series C common stock issuance and the Broadband Spin-Off during 2014, as discussed in note 1, the number of warrants outstanding was adjusted to 21,085,900 with a strike price of $64.46 per share. "

 

Reading this makes my head ache. I am trying to figure out if what they have done is in fact offset the 20 million shares in the post-tracker structure so that it's all included and there will be no dilution or if there is a potential 5 million (post tracker split) dilution to LMCA in 2024.

 

There is still the dilution.  They just moved the strike price of the convertible notes up from $47.43 to $64.46.  Not only is that more favorable for shareholders (due to higher conversion price) but I believe there is considerable tax benefits in that the premiums get to be amortized as interest expense over the life of the deal.

[usdtor05]

 

The discounts right now are as follows:

 

1. LSXMK - 16% (assuming net debt is 200) NAV - $12.1B, MC - $10.2B

 

2. Braves - 12% NAV - $1b (nets rights offering at today's price less 20% against the interco) and MC - $901M adjusted for $200M rights

 

3. Media - 11.4% - NAV - $1.6B MC - $1.7B

 

Does your LMCA NAV estimate include the Vivendi payment?  When I include that I arrive at slightly over $2B valuation.

 

It doesn't thank you

[scorpioncapital]

At $17.8 for LMCK, it seems you are getting Live Nation for roughly 1/2 the current market price. Put another way, you buy this tracker at the cost of their investment which is about $11/share (LVY current $22/share).

[netnet]

So, anyone keeping BATRA and why?

 

Very superficially, I don't see a big point of investing in sports team...  :-\

I am prejudiced against sports though and I am somewhat biased due to the sports team "investments" that are basically rich-boy-trophy-toys.

 

Edit: did BATRA really drop from $36 to $20 today during the day? ???

Edit2: and LMCA dropped from $27 to $19? ???

 

On a (very) superficial level, it's Malone and it's a bit wonky and there is a rights offering, that tells me that there is a high probability of that being one of the better pieces.  Past is not prologue, but properly run major market sports teams with their own stadiums are assets that just seem to go up in price (perhaps that means we are now at a peak), despite fans displeasure the well run teams have excellent current income.  They also have 1/30 of MLB's digital company that has about 360M ebitda if memory serves.

[colinwalt]

At $17.8 for LMCK, it seems you are getting Live Nation for roughly 1/2 the current market price. Put another way, you buy this tracker at the cost of their investment which is about $11/share (LVY current $22/share).

 

OK, I guess I'm missing something, but before the trackers:

 

The security ownership information is given as of November 30, 2015 and, in the case of percentage ownership information, is based upon (1) 102,096,296 shares of our Series A common stock (LMCA), (2) 9,870,966 shares of our Series B common stock (LMCB) and (3) 222,269,999 shares of our Series C common stock (LMCK), in each case, outstanding on that date. The percentage voting power is presented on an aggregate basis for all series of common stock.

 

So that's:

 

102 / 4 = 25

10 / 4 = 2.5

222 / 4 = 55

 

Total = ~ 82.5 * 18 = about 1.5B$

 

 

LYV M.Cap = 4.5B * .34 = about 1.5B$

[jgyetzer]

At $17.8 for LMCK, it seems you are getting Live Nation for roughly 1/2 the current market price. Put another way, you buy this tracker at the cost of their investment which is about $11/share (LVY current $22/share).

 

OK, I guess I'm missing something, but before the trackers:

 

The security ownership information is given as of November 30, 2015 and, in the case of percentage ownership information, is based upon (1) 102,096,296 shares of our Series A common stock (LMCA), (2) 9,870,966 shares of our Series B common stock (LMCB) and (3) 222,269,999 shares of our Series C common stock (LMCK), in each case, outstanding on that date. The percentage voting power is presented on an aggregate basis for all series of common stock.

 

So that's:

 

102 / 4 = 25

10 / 4 = 2.5

222 / 4 = 55

 

Total = ~ 82.5 * 18 = about 1.5B$

 

 

LYV M.Cap = 4.5B * .34 = about 1.5B$

 

Not sure if I'm missing your point, but I agree with your math.  The total LMCA/B/K market cap now is equivalent to the LYV stake, but several other public and private equity holdings are attributed to that tracker along with the Vivendi cash settlement.  So you essentially pay $0 for everything else or 1/2 the current price for LYV as scorpion mentioned above - depends how you like to distribute the math.

[colinwalt]

At $17.8 for LMCK, it seems you are getting Live Nation for roughly 1/2 the current market price. Put another way, you buy this tracker at the cost of their investment which is about $11/share (LVY current $22/share).

 

OK, I guess I'm missing something, but before the trackers:

 

The security ownership information is given as of November 30, 2015 and, in the case of percentage ownership information, is based upon (1) 102,096,296 shares of our Series A common stock (LMCA), (2) 9,870,966 shares of our Series B common stock (LMCB) and (3) 222,269,999 shares of our Series C common stock (LMCK), in each case, outstanding on that date. The percentage voting power is presented on an aggregate basis for all series of common stock.

 

So that's:

 

102 / 4 = 25

10 / 4 = 2.5

222 / 4 = 55

 

Total = ~ 82.5 * 18 = about 1.5B$

 

 

LYV M.Cap = 4.5B * .34 = about 1.5B$

 

Not sure if I'm missing your point, but I agree with your math.  The total LMCA/B/K market cap now is equivalent to the LYV stake, but several other public and private equity holdings are attributed to that tracker along with the Vivendi cash settlement.  So you essentially pay $0 for everything else or 1/2 the current price for LYV as scorpion mentioned above - depends how you like to distribute the math.

 

Got it thanks, my bad... I guess this is why I still have need a day job :-(

 

Having said that, I was also thrown off by some earlier posts which didn't imply such a high discount.

[mike]

Could someone please have a quick look at my math? It seems that Brave's discount is huge.

 

--------------------------Market Cap----------------------

        Price         Shares Value

BATRA 18.05 10.2         184

BATRB 18.05 1.0         18    (since BATRB is illiquid, I just assume it is worth the same as BATRA)

BATRK 17.5         22.3         389

Total                         592 m

--------------------------NAV-----------------------------------

I am not very sure about this. The 1026 m NAV on

page 8 of the presentation is after 200 m rights offering.

Does it mean the NAV is $826m now? If it is, then the discount is: 1 - 592/826 = 28%.

[mevsemt]

Could someone please have a quick look at my math? It seems that Brave's discount is huge.

 

--------------------------Market Cap----------------------

        Price         Shares Value

BATRA 18.05 10.2         184

BATRB 18.05 1.0         18    (since BATRB is illiquid, I just assume it is worth the same as BATRA)

BATRK 17.5         22.3         389

Total                         592 m

--------------------------NAV-----------------------------------

I am not very sure about this. The 1026 m NAV on

page 8 of the presentation is after 200 m rights offering.

Does it mean the NAV is $826m now? If it is, then the discount is: 1 - 592/826 = 28%.

 

Look at page 7 of the same presentation... LMC will have a 20% intergroup interest in BATR (I think this stays at 20% even after the rights offering), which corresponds to $205 million of the NAV.  So, the discount then becomes:

 

1 - 592 / (826 - 205) = ~5%

[cleonard12]

I've spent some time trying to untangle the knot and my take away is that LMCA is the most attractive tracker. When including the Vivendi settlement, my math is that it's trading in the range of a 25% - 30% discount today (spreadsheet attached, feedback appreciated if areas are off). This security is small and complex, but its also likely where the next big investment for Malone will occur. Following the BATR rights offering, which will be used to repay the $165mm intergroup note to LMCA, and after Vivendi, this tracker should have $600mm+ of "dry powder". For me its sort of a no brainer, buy a collection of assets at a steep discount and you also have Malone/Maffei teed up for the next deal.

LMCA_Math.xlsx

[Jurgis]

Swapped from LMCA to LMCK at ~4% discount. Not great, but I also added to the position and so it was possibly OK spread to swap.

[mike]

Could someone please have a quick look at my math? It seems that Brave's discount is huge.

 

--------------------------Market Cap----------------------

        Price         Shares Value

BATRA 18.05 10.2         184

BATRB 18.05 1.0         18    (since BATRB is illiquid, I just assume it is worth the same as BATRA)

BATRK 17.5         22.3         389

Total                         592 m

--------------------------NAV-----------------------------------

I am not very sure about this. The 1026 m NAV on

page 8 of the presentation is after 200 m rights offering.

Does it mean the NAV is $826m now? If it is, then the discount is: 1 - 592/826 = 28%.

 

Look at page 7 of the same presentation... LMC will have a 20% intergroup interest in BATR (I think this stays at 20% even after the rights offering), which corresponds to $205 million of the NAV.  So, the discount then becomes:

 

1 - 592 / (826 - 205) = ~5%

 

That is where things become confusing. Note 4 on page 7 says

20% inter-group interest in Liberty Braves Group. Will not be reflected in outstanding share count of Liberty Braves Group.

 

Why does LMC's inter-group interest matter in the calculation of Brave's NAV? When you calculate WFC's book value, you don't subtract BRK's 9% stake from it. Why should we subtract LMC's inter-group interest from Brave's NAV?

 

A related question, why the inter-group interest will not be reflected in outstanding share count of Braves? Go back to the WFC example, WFC's share count includes BRK's stake. Why is Brave's case different?

 

Another related question to @mevsemt, how does the inter-group interest stay at 20% after the offering? Do they simply pay 200m * 20% = 40m? Then their pro forma cash should be reduced by 40m in page 7. However, I don't see it mentioned anywhere.

 

I think I am missing something somewhere. Any help would be appreciated.

[scorpioncapital]

On their website it says, http://ir.libertymedia.com/faq.cfm

 

 

Will the Liberty Media Group be issued shares to represent its inter-group interest in the Liberty Braves Group?

 

No. The 20% inter-group interest that the Liberty Media Group holds in the Liberty Braves Group is not reflected in the number of outstanding shares of Liberty Braves common stock. The inter-group interest is represented by a notional number of shares of Liberty Braves common stock which are attributed as an asset of the Liberty Media Group and should be taken into account when considering the value of the Liberty Braves Group that is represented by the outstanding shares of Liberty Braves common stock. The notional shares may be converted at any time into issued and outstanding shares of Liberty Braves common stock.

 

How will the Liberty Braves Group rights offering impact the Liberty Media Group's inter-group interest?

 

"The Liberty Media Group will not receive exercisable subscription rights in the proposed Liberty Braves Group rights offering. Rather, the inter-group interest will be adjusted pursuant to the terms of the Liberty Media Corporation’s certificate of incorporation. If the rights offering is fully subscribed, the inter-group interest held by the Liberty Media Group is expected to be adjusted."

 

 

PS. Re: LMCK/LMCA spread. If the spread is constant, makes no difference which you buy. But historically has the spread ever gone to zero or LMCK overtaken LMCA? A complete close represent 4% gain, but a partial close more realistically would be say 2% to account for the control and margin differences. But I'm thinking it won't matter much which you buy if you buy.

[Jurgis]

 

PS. Re: LMCK/LMCA spread. If the spread is constant, makes no difference which you buy. But historically has the spread ever gone to zero or LMCK overtaken LMCA? A complete close represent 4% gain, but a partial close more realistically would be say 2% to account for the control and margin differences. But I'm thinking it won't matter much which you buy if you buy.

 

Liberty company spreads vary from 1 to 1.05 and you can roundtrip gain if you sell/buy at best points. Some Liberties roundtrip more often, some less often. I swap at the extremes or so, but YMMV and all that.

 

LILA(K) is exception and still trading at .91, which makes no sense even with liquidity explanation.

[mevsemt]

Mike-

 

LMC's intergroup interest in the Braves matters because it's not reflected in the share count of BATR.  An easier way to think about it would be as follows: 80% of BATR is represented by 34.5 million shares, so you could pretend there are really 43.1 million shares outstanding (34.5/80%) and LMC simply owns 8.6 million shares (43.1-34.5).

 

The way it's presented in the slide deck shows LMC owning 20% of BATR after the rights offering has been conducted.  So, I could be wrong here, but my interpretation is LMC doesn't have to put up any additional capital to maintain their 20% ownership (perhaps this is because their intergroup interest isn't represented via actual shares). 

[mike]

Thanks for the help, scorpioncapital and mevsemt!

 

Now, discount is much smaller:

1 - 592/(826 * 80%) = 10%.

 

It does not look attractive at all compared to LMC's 20+% discount.

[orion]

It does not look attractive at all compared to LMC's 20+% discount.

 

+1

 

Will be interesting to see what Malone will do with the cash in LMC. LMCK probably the best bet right now.