Liberty Media (LMCA/LMCK) reported an uneventful quarter.  Not much of a surprise given all the restructuring activity in the past six months as the company split into two, separating its 28% stake in Charter Communications into newly formed Liberty Broadband (LBRDA/LBRDK).  Northlake clients now own stock in both classes of stock at both companies.

LMCA/LMCK is comprised primarily of 57% of SiriusXM Satellite Radio (SIRI).  SIRI makes up about 90% of the market cap of LMCA/LMCK.  SIRI had previously reported good 4Q14 results and strong guidance for 2015 propelling its stock to quick gain of 10% early in the year.  LMCA/LMCK have followed are up strongly to begin the year as well.

LMCA/LMCK earnings reports are dull unless the company announces or comments on restructuring activities to try to create further value for shareholders.  The idea behind the split of Liberty Media and Liberty Broadband was that the prior entity was too complex with differing strategies needed at SIRI and Charter.  As a result, the old LMCA/LMCK traded at a meaningful discount to the underlying value of its assets.  Splitting into two companies, each with over 90% of its value tied up in another company, should close the discount.

As it turns out, the discount has not closed and even expanded slightly.  This was the primary topic on LMCA/LMCK’s conference call and something I have been hoping for months that an analyst would ask.  Several di but interestingly CEO Greg Maffei opened his remarks by stating that they were well aware of the expanded discount.  LMCA did buyback a little stock for the first time in several quarters although the amount was small.  Maffei was non-committal about further buybacks or actins to reduce the discount but the fact that he was so aware is quite comforting.

It goes without saying that closing the discount only makes money for LMCA/LMK shareholders if SIRI shares say steady or advance.  I think SIRI can trade to at least $4.50, maybe as high as $%, over the next 12 months based on valuing its free cash flow similar to cable companies.  If that happens, LMCA/LMCK shareholders get both the rise in SIRI and a bonus as the discount at which LMCA trades vs. SIRI closes.  LMCA/LMCK has a long, long history of closing gaps in valuation though financial and strategic actions.

LMCA/LMCK is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake regulatory filings can be found at www.sec.gov.  LMCA/LMCK is a net long position in the Entermedia Funds.  Entermedia is a long/short equity hedge fund focused on media, communications, leisure, and related technologies.  Steve Birenberg is the portfolio manager of Entermedia, has personal monies invested in the funds, and controls Entermedia’s investment management company.