LMCA - Liberty Media

[WayWardCloud]

Just don't know how to use Edgar, I'll look for DEF 14As in the future - thanks for constantly teaching me stuff :)

[Shooter MacGavin]

Just don't know how to use Edgar, I'll look for DEF 14As in the future - thanks for constantly teaching me stuff :)

 

I hear you.  the EDGAR system is definitely antiquated and confusing. BTW what i sent you was the one from last year and the new one just posted.  FWONK share count is the same for Malone though.

[WayWardCloud]

I thought I'd share my results with the community!

 

I went through all the DEF 14 and put them together. However, my findings sometimes differ from this Bloomberg article : https://www.bloomberg.com/news/articles/2017-08-10/beat-the-s-p-500-by-investing-alongside-john-malone so maybe take them with a grain of salt. To be specific, I find much more shares owned for Liberty Global and Liberty Formula One and much less for Liberty Latin America.

 

I've also counted Maffei's shares, Fries', or whoever is the CEO for each company when applicable. The least I can say is that interests are aligned and MASSIVE.

 

- 04/19/2018 document updated with Munger_Disciple's new data for LBTY -

Malone_Holdings.xlsx

[Liberty]

Thanks WayWardCloud, that's great.

[dcollon]

Thanks very much for sharing the data WayWardCloud

[gurpaul88]

Thanks!

[Munger_Disciple]

Liberty Global just released their 2018 proxy. It shows Malone holding 30.84 million shares (A+B+C). It looks like he sold approximately 2.2M shares during the last 12 months.

[Liberty]

Interview with Greg Maffei:

 

http://variety.com/2018/biz/features/liberty-media-ceo-greg-maffei-1202803710/

[scorpioncapital]

He seems to be a believer more in distribution then content though formula one is technically some combination of both and possibly a fixer upper.

[WayWardCloud]

Here's what I'm taking away from the Q3 call

 

 

Formula One

 

Chase Carey is not a good public speaker. It's hard to imagine him leading a team with conviction, but maybe he's different in person.

He kept repeating that things at F1 were harder than he initially thought and even though he was pressed to do so he wouldn't say 2019 was going to be any different.

I just don't read any form of confidence from him, almost a panic.

 

The good: a/ F1's online following is growing rapidly to impressive numbers. b/Events seem well organized with successful pairing of F1 races with concerts (Britney Spears + Bruno Mars in Austin for example), hotels, fan zones, merchandising, food and drinks.

The bad: a/ The OTT product is so far a complete technical disaster (way to turn off your core fan base) b/ Overall TV viewership is slightly down year on year c/ Negotiations with the teams about the Concord agreement sound very adversarial.

 

 

SiriusXMPandora

 

Greg Maffei says a IHeart deal has become very unlikely (I don't understand what has changed).

He's certain Apple won't buy them either despite the rumors.

He acknowledges a pairing of Live Nation with the music side of Liberty would make more sense but not at the valuation it's currently trading at (LYV is richly valued, LSXMA suffers from a ~30% discount)

 

 

Finally, what do you guys make of the ~6.5X debt ratio the Formula One group carries? It sounds awfully high but then again I don't know much about debt.

[thefatbaboon]

Don’t read too much into Chase’s way of speaking. That’s how he has always sounded - a slightly jittery way of speaking and also he is an exec who spends time thinking and talking about what’s wrong or difficult in the business. Personally that’s something I like. 

 

That said after the massive post deal run up I found it difficult to not sell F1 on account of valuation and I don’t like Ferrari’s power.

 

Re leverage.  So long as business stays decent, the business is all fcf and can easily support a lot of debt.  If things turn south in some meaningful way (unlikely) then the equity market cap at this huge multiple is screwed with or without leverage. So I wouldn’t  worry about leverage.

[Liberty]

David Faber interview with Greg Maffei:

 

https://www.cnbc.com/video/2018/11/14/liberty-media-ceo-greg-maffei-on-media-mergers.html

[Foreign Tuffett]

David Faber interview with Greg Maffei:

 

https://www.cnbc.com/video/2018/11/14/liberty-media-ceo-greg-maffei-on-media-mergers.html

 

Maffei is so smart and articulate....makes most large company CEOs look like amateurs.

[WayWardCloud]

Faux Maffei (

) is apparently joking about a new FWONA (short?) thesis on VIC but unless we're part of the selected few we won't be able to read it for another 3 months :(

Can anyone share the love please? (if that's OK with the rules of this forum of course...).

[WayWardCloud]

Liberty Media in talks with Hollywood talent agency CAA for a stake in their company.

https://www.ft.com/content/493963f4-14b2-11e9-a581-4ff78404524e

[Guest eatliftinvestgolf]

I haven't followed the liberty complex for a long time (due to age) so I likely have lower historical knowledge of transactions than this group.  After reviewing the 2018 annual report and 2019 investor day presentation, I was left wondering if anyone has thoughts on why Malone is materially under-weight Formula One on a look-through economic basis relative to the market cap of the three Liberty Media tracking stock components.  Or, is it just an artifact of a prior transaction structure?

[Guest eatliftinvestgolf]

I haven't followed the liberty complex for a long time (due to age) so I likely have lower historical knowledge of transactions than this group.  After reviewing the 2018 annual report and 2019 investor day presentation, I was left wondering if anyone has thoughts on why Malone is materially under-weight Formula One on a look-through economic basis relative to the market cap of the three Liberty Media tracking stock components.  Or, is it just an artifact of a prior transaction structure?

 

I think I answered my own question... I think it's because of LMCK Equity Issued to Sellers in the acquisition post-split.

[scorpioncapital]

https://ir.libertymedia.com/static-files/c59118a7-d205-4263-9301-54c467a689ee

 

Seems big moves between FWON and SIRIUS trackers.

 

If you do nothing you've increased your ownership in FWON by, I estimate, 50%.

In other words you need to sell down and buy LYV if you want to maintain the same ownership percentages.

 

Any thoughts on the strategy here.

[WayWardCloud]

I remember an analyst asking in a recent Q&A why they weren't moving LYV to LSXM and Maffei explained to him that there was essentially no way of doing so without being unfair to LSXM holders. Although I didn't understand his explanation and the analyst sounded like he was having a hard time as well.

 

The fact that FWON had to recapitalize so quickly and so massively even though their debt ratio had recently organically come down from 8X to 5X seems to indicate that either Malone has been swimming naked since 2016 OR they're about to make an acquisition (my guess is the former).

 

I'm bullish on Formula One and Live Nation but not at all on SiriusXMPandora (although there's probably going to be a quick buck to make at some point if you can predict when they collapse the tracker discount). So I'll probably grab some shares of LYV if they ever hit new lows. Not in any rush to do so as I don't see how they can possibly do what they do for a very long time to come and are going to be bleeding until then.

 

 

[scorpioncapital]

I think even they didn't know the pandemic was coming. All 3 are short-term impaired. But why are you not so bullish on Sirius XM? Of the three, it seems to be the least impacted by the coronavirus. All three are , but that one the least.

[WayWardCloud]

I think even they didn't know the pandemic was coming.

 

I didn't mean to say that they should have seen the pandemic coming, nobody did. But one can safely predict that some unpredictable shit will eventually happen to their business and choose to wear swim trunks even though the tie is high.

 

All 3 are short-term impaired. But why are you not so bullish on Sirius XM? Of the three, it seems to be the least impacted by the coronavirus. All three are , but that one the least.

 

Oh yeah, nothing to do with the virus indeed.

I try to think of investments with a 5-10 years timeline in mind.

 

I believe satellite radio is an inferior technology with secular headwinds blowing stronger against it every day because it's a low-bandwidth high-latency one-way connection. I'm concerned SIRI could be the next QVC: high FCF + leverage works great until your boomer clientele starts dying off. I'm surprised SiriusXM hasn't yet reached its plateau followed by a decline but in my mind it's only a matter of time.

 

Malone has a history of never calling quits on melting ice cubes that are optically cheap. Here is what I picture could happen. When user growth eventually starts stalling, the stock will re-rate down to a more humble PE ratio. This will make it look cheap on a P/FCF basis. After all, even without growth, this thing is still minting money every month. So management decides to buy tons of shares back. Except the stock keeps getting cheaper and cheaper because now the user base is actually shrinking. At this point the PE ratio adjusts again and becomes absolutely mouth watering... All the earnings are plowed into buybacks instead of dividends which only ends up magnifying the fall. Value investing blogs are calling it a no-brainer, especially with all the wonderful hidden assets from their library coming in for free. The end.

[scorpioncapital]

You know, I have observed this with several malone companies (including cable broadband). A technology that pumps out tons of cash but there are rumblings on the horizon of new technologies and methods. I guess it really is a bet that they 'get out' by selling or shifting capital at the right time to the new technology or a new field entirely. If one doesn't have this confidence it could be as you say, a slow motion wind-down with frustrating returns. I guess in this sense , the ownership of 33% of LYV in the tracker is a good thing, at least you get a better business. Or as you say you can just buy LYV. I found it a bit weird in the presentation that LXSMA is going to end up with 2% of formula 1 as well! Also many people are saying they might go from 72% of Sirius to 100% but if what you are saying is true, perhaps they want to go the other way and sell down from 72% to 50% or below.

[merkhet]

You know, I have observed this with several malone companies (including cable broadband). A technology that pumps out tons of cash but there are rumblings on the horizon of new technologies and methods. I guess it really is a bet that they 'get out' by selling or shifting capital at the right time to the new technology or a new field entirely. If one doesn't have this confidence it could be as you say, a slow motion wind-down with frustrating returns. I guess in this sense , the ownership of 33% of LYV in the tracker is a good thing, at least you get a better business. Or as you say you can just buy LYV. I found it a bit weird in the presentation that LXSMA is going to end up with 2% of formula 1 as well! Also many people are saying they might go from 72% of Sirius to 100% but if what you are saying is true, perhaps they want to go the other way and sell down from 72% to 50% or below.

 

Liberty SiriusXM is taking on a 2023 convertible from Formula One with exposure to LSXMA, FWONA, and BATRA. The transfer of the Formula One & Braves stock is meant to cover that eventual exposure.

[merkhet]

For Formula One, despite all the talk about an acquisition, I don't know that the balance sheet transfer was based on that -- there's talk about Formula One needing to provide assistance to the teams, promoters, etc. to make sure that the ecosystem can make it to the end of the tunnel. Some of these teams are attached to large corporations that can support them (Mercedes, Ferrari, etc.) but some of them are not (Haas, Williams, etc.). The promoters are likely very screwed even if the races open up because they'll likely do the first few races without fans, so there's no tickets, no corporate hospitality, etc.

[Munger_Disciple]

Oh yeah, nothing to do with the virus indeed.

I try to think of investments with a 5-10 years timeline in mind.

 

I believe satellite radio is an inferior technology with secular headwinds blowing stronger against it every day because it's a low-bandwidth high-latency one-way connection. I'm concerned SIRI could be the next QVC: high FCF + leverage works great until your boomer clientele starts dying off. I'm surprised SiriusXM hasn't yet reached its plateau followed by a decline but in my mind it's only a matter of time.

 

Malone has a history of never calling quits on melting ice cubes that are optically cheap. Here is what I picture could happen. When user growth eventually starts stalling, the stock will re-rate down to a more humble PE ratio. This will make it look cheap on a P/FCF basis. After all, even without growth, this thing is still minting money every month. So management decides to buy tons of shares back. Except the stock keeps getting cheaper and cheaper because now the user base is actually shrinking. At this point the PE ratio adjusts again and becomes absolutely mouth watering... All the earnings are plowed into buybacks instead of dividends which only ends up magnifying the fall. Value investing blogs are calling it a no-brainer, especially with all the wonderful hidden assets from their library coming in for free. The end.

 

+1

 

Excellent post. I would also add that almost all Liberty entities have huge debt loads due to Malone's mantra of "tax advantaged levered free cash flow growth". However this strategy makes Liberty entities very fragile and susceptible to external shocks like COVID-19. For instance compare Berkshire to Liberty Media. Both businesses are affected greatly by COVID-19 but Berkshire is a fortress with $128B in cash and will have no trouble getting through COVID-19 interruptions unlike LMCA entities like F1.