Effective this past Monday, Liberty Media completed its restructuring into three tracking stocks.  For each share of Liberty Media (LMCA/LMCK), you received one share of Liberty Sirius (LSXMA/LSXMK), 0.10 shares of Liberty Braves (BATRA/BATRK), and 0.25 shares of new Liberty Media (LMCA/LMCK).

Liberty Media is a collection of media and entertainment assets managed by John Malone, one of the greatest investors our time.  Think of him as a deal-making version of Warren Buffet focused exclusively on media and entertainment.  It is fair to say that Malone is the person most responsible for the creation of the modern cable industry.  Malone is the largest investor in Liberty Media with a stake worth billions of dollars.  Many assets have passed through Liberty Media over the years including large stakes in Turner Networks, DirecTV, AT&T, and Discovery Communications.  Presently, the large investments at Liberty Media include majority control of Sirius XM Satellite Radio, 35% of Live Nation Ticketmaster, and full ownership of the Atlanta Braves Major League Baseball team.  Liberty Media also owns many small stakes in public and private companies.

Over the past few years, Liberty Media has traded at a large discount to the value of its underlying assets.  In order to narrow the discount and increase the flexibility of each asset group for future strategic action, the company is being split into three pieces.  Liberty Media has pursued this strategy to enhance shareholder value consistently over the years.  Northlake clients are well aware of this having received spin-offs of Liberty Broadband and Liberty Global Latin America within the past two years.

Northlake is completing the sale of Liberty Braves (BATRA/BATRK) today for all clients.  The holding is too small to bother with and we do not see enough upside in the next year to justify purchasing more.  We are holding Liberty Sirius as we have long been a fan of the Sirius growth profile and business model that produces high free cash flow which is used to buyback Sirius (SIRI) stock and increase the ownership stake of Liberty Sirius.  We expect LSXMK and SIRI to combine within the next few years.  LSXMA/LSXMK trade at a 10-11% discount to SIRI that we feel is unwarranted providing incremental upside and a downside cushion.  For now, we are holding LMCA/LMCK, of which the 35% stake in Live Nation (LYV) represents about 2/3rds of asset value.  We are bullish on LYV, which is growing steadily around 10% a year and benefiting from its focus on millennials, its global dominance in the concert promotion and ticketing business, and the preference of people and advertisers for experiences over things.   LSXMA/LSXMK trade at about a 20% discount to net asset value, a level we believe is much too wide.  In addition, there is a lot of cash and easily saleable assets that could be used to buy back stock or invest in new businesses with John Malone’s expertise guiding the way.

We have a ton of detail on the each new Liberty stock if you want to learn more.