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.
UPDATE, 12: 00 PM: No word from Starz execs about when they might announce a digital streaming deal to replace the one with Netflix, which expires in February. “There are a lot of conversations going on,” Starz CEO Chris Albrecht told analysts today. “It’s a road that needs to be evaluated almost on a weekly basis.” The company hopes to license programs from its premium channel to a premium-priced streaming service – meaning, one that charges more than Netflix. As more companies enter the online video market “they’ll begin to segment and differentiate,” says Liberty Media CEO Greg Maffei. “That’s something we would embrace.” Albrecht said that “we didn’t believe it was appropriate to have our products included in a low-cost service.” Do they really expect lots of consumers to pay high prices in this weak economy — especially with the anemic numbers cable and satellite companies are posting for premium channels? At Starz the 3Q sub figure was