The satellite radio company’s shares are up 11.4% since early Thursday while other NASDAQ stocks collectively are down 4.4%. What’s going on? Well, it seems that many analysts who attended Liberty Media’s annual dog-and-pony show for them on Thursday came away convinced that Sirius XM is preparing to see John Malone lift his company’s 40% stake well past 50%. He has to wait until March to avoid taking a tax hit on such a move — and we all know how much Malone hates to pay taxes. After that there’d be a tax advantage: Sirius has $8B in net operating losses that could be used to shelter future payments. That’s great now, although the losses “sucked” when the company was racking them up, CEO Mel Karmazin told Liberty investors at last week’s gathering. So, is Liberty interested in buying Sirius? A lot of comments that Liberty CEO Greg Maffei made last week sure make it sound that way. “There are few businesses that I have as much confidence in,” he said. ”Boy, it’s got a heck of a tail wind behind it. Find me another business” with as much opportunity. Sirius’ first consumer rate hike, coming in January, ”is a great opportunity and there’s a potential for more…(Profit) margins will expand….It’s our kind of business.” He added that his company
Investors seemed to like what they heard at today’s annual confab for John Malone’s Liberty Media. Shares of the hodge-podge of companies it either owns or controls were up on a day when the market was shaken by new fears that the European debt crisis will widen. Liberty Starz ended the day +1% and Liberty Capital was +0.5% after their parent said it will combine the two tracking stocks into a single asset-based security. But Live Nation was +6.7%, Barnes & Noble was +5%, and Sirius XM was +4.8% following CEO presentations to the Street.
Malone was more subdued than usual. But the executive who became a billionaire on the back of his devilishly complex deals — often to help him avoid paying taxes — got a chuckle in his response to a question about whether the changes in his tracking stocks will make their businesses confusing for investors. “We’ll get as complicated as we need to get to highlight value.” he said.
Sirius XM’s Mel Karmazin won the biggest laughs, though, with
This will give Liberty Media Chairman John Malone and other executives a lot to talk about later this morning at the company’s annual dog-and-pony show for investors. The decision to convert Liberty Starz and Liberty Capital from tracking stocks into a single asset-based stock should diminish the growing sense that Malone was fattening up Starz for a big deal — possibly a sale. The channel has been investing heavily in original programming, and Liberty Starz just unveiled a $1.5B credit facility. Janney Capital Markets analyst Tony Wible says that the Street “likely will be mixed in how it interprets the news” of the change in Liberty Starz’ status. Meanwhile, Liberty’s $1.25B stock repurchase “should help ease (investors’) concern.” And hope springs eternal: Miller Tabak analyst David Joyce says that “in time we would expect M&A activity with these assets to pick up again.”
Here’s the company’s release:
ENGLEWOOD, Colo. — Liberty Media Corporation (Nasdaq: LCAPA, LCAPB, LSTZA, LSTZB) (“Liberty”) today announced that its board of directors has unanimously voted to eliminate Liberty’s tracking stock structure by converting each share of its Liberty Starz common stock into 0.88129 of a share of the corresponding series of Liberty Capital common stock, effective at 5:00 p.m., New York City time, on November 28, 2011 (the “Conversion Date”). Cash will be paid in lieu of fractional shares.
It’s “more likely than not” that new online video streaming providers such as Amazon will offer some programming on a premium tier — a contrast with Netflix’s single-price package – Liberty Media CEO Greg Maffei said this morning at the Goldman Sachs Communicopia conference. He broadly hinted that his company’s desire to charge extra for Starz was a big reason why the premium channel recently ended negotiations to extend its carriage deal with Netflix. The current arrangement, he says, is “inconsistent” with the way consumers receive Starz on pay TV.
More broadly, Maffei says that Liberty is on track to split off its Liberty Capital and Liberty Starz tracking stocks by tomorrow now that it has beat back a court challenge by bondholders. The deal transfers some assets to the spun-off companies, violating some bond agreements. But the Delaware Supreme Court yesterday upheld a lower court decision that said the split-off is OK because it isn’t part of what it called an “overall scheme” to hurt bondholders. That likely won’t change the overall strategy for the company that’s controlled by the famously tax-averse former cable titan John Malone — and that some analysts say is little more than a portfolio of stock holdings. “Finding things to buy at attractive prices is the biggest chalenge we have today,” Maffei says.
Liberty Media chairman John Malone is probably getting an earful from his pals in the cable industry this afternoon after he made a comment that’s sure to haunt both him and them. Talking to Wall Street analysts about the growing number of consumers who buy high-speed Internet services from cable companies, Malone said that “cable is pretty much a monopoly now” in broadband. Oops. The executive who once was considered such a monopolist in cable TV that Al Gore referred to him as Darth Vader caught himself, adding, “I don’t want to use that word.” But he may be reminded that he used the M word every time consumer advocates call on federal regulators to crack down on cable — for example, by insisting on net neutrality rules. Malone says consumers won’t cut the cord with cable even as services including Netflix offer movies and TV shows over the Web. Phone companies such as Verizon and AT&T “are not going to aggressively” build out fiber-optic services that could match the speed and security of cable’s broadband, he said. Meanwhile, “the threat of wireless broadband is way overblown. There just isn’t enough bandwidth” for them.
In contrast to Malone’s blunt comments, other Liberty executives said they wouldn’t provide many details about Starz’s new lawsuit against Dish Network. Starz, and in a separate suit Disney, allege that Dish violated their contracts by giving satellite customers free access to the premium channel for about a year. Starz CEO Chris Albrecht says that his company didn’t lose money; Dish pays a fixed annual rate to offer Starz and Encore. But the additional viewers may have helped Starz’s ratings.