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Added more Liberty Media (LMCK)

July 24, 2014

I couldn’t help myself. Yesterday was the last day Liberty Media (LMCA) was trading before the distribution of Liberty Media C shares (2 Liberty Media C shares for each Liberty Media A share). The when-issued Liberty Media C shares (LMCKV) were trading at a 3% discount to the Liberty A shares for no apparent reason that I could think of. On top of that, when a stock split happens often the post-split shares trade up in value (again for no real reason… except for human nature). So we had a discount for the when-issued C shares AND the probability that the shares would trade up when the distribution happens today (July 24)… sounds like a no brainer for me, especially because I have wanted to own Liberty Media for a while. Nothing like a discount to make this shopper bite! Yet, it has to be noted that the situation with the Liberty shares is a bit more complex because the shares being distributed are a different class (C vs. A) and have no voting rights (though they do have the same economic rights). I don’t really think that the voting rights for the class A shares have any value because Malone controls the company with his supervoting B shares, so I discounted this seeming difference and dove in. Today will tell if my short-term thesis is correct. Not that I’m that interested in the short-term, mind you. I’m really interested in the unwinding of Liberty Media into the Sirius stake on the one hand and the new Liberty Broadband (Comcast, TW etc) on the other.  That transaction will be in the form of a distribution of Liberty Broadband shares AND rights to Liberty Media A, B and C shareholders, and it should happen sometime in early fall. THAT’s the transaction I’m really interested in as it should ‘unlock some hidden value’, i.e. reprice the sum of the two parts upward. I’ll be taking a closer look at that transaction when the timing and final details are announced.

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  1. If the class structure is ever collapsed, I think that Malone will push for giving a several percent premium for the supervoting shares.

    • However, any dividends will be beneficial for the non-voting shares. So far, Malone has distributed shares of DTV. In LINTA/LVNTA, rights for LVNTA were distributed (so the LVNTB shares had their voting power diluted slightly).

    • I don’t think ascribing a greater ownership interest to class B shares would be legal, as both A and C shares currently have the same economic interest in the Liberty assets as the B shares. I can’t remember any time that Malone has thrown his voting weight around like that. Obfuscation, yes. A cheap shot like that.. I don’t think so.

      What stumps me is why the LMC class A shares are trading so much higher than the class C shares. They both have the same economic interest, will both get the same number of Liberty Broadband shares and rights… so why the premium for the A shares??? Guess I’ll just have to wait and see…

      Thanks for the comments Glenn

      • 1- If you look at Liberty and DTV, the B shares of DTV were converted to A shares at a premium.

        There was another instance where Malone collapsed a share structure… with Liberty shares I think. It’s described in Cable Cowboy but I forgot the details.

        2- Sometimes the lesser voting shares will trade at a premium. It happened very briefly with Berkshire A and B. The spread has been much bigger for other stocks where the supervoting shares are highly illiquid… e.g. Lennar, IDT C, etc.

        So perhaps that is something to watch for if you have lesser voting shares.

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