Liberty Media Corporation: Master Capital Allocator Behind a Free Cash Flow Machine by Bewoulf Capital

We have spent a lot of time reading about John Malone in the last few months and we do think he deserves a place in our portfolio. Please see our thoughts attached on Liberty Media Corporation (LMCA/B/K)


Disclosure: Long LMCK

John Malone’s Play Book

Invest in Strong Subscription Businesses with Steady Cash Flow ? Cable Companies like Charter, TWC, Bright House, Sirius

Cut Costs ? Drive Efficiency by Managing Costs Tightly

Leverage to Manageable Debt as a Function of Cash Flow ? Manage Debt / EBITDA between 3X and 5X and with Long Maturities

Minimize Taxes to Government with Focus on Free Cash Flow and Not on Earnings ? Financial Engineering & M&A Creativity

Return Capital to Shareholders ? Leveraged Buybacks ? Sell Assets at Higher Multiple to Buy Stocks at Lower Multiples of Cash Flow

Executive Summary

Liberty Media Trades at a 18% Discount to NAV which is Unwarranted Given John Malone’s Say over Sirius and Live Nation’s Cash Flow

Sirius and Live Nation’s Cash Flow Dynamics Looks Attractive

Sirius will Continue to be a Valuable Asset in a Connected Car World & NonMusic Content will Ensure Viability in the Future

Sirius’s NOL’s will Ensure that its Earnings will Continue to Tax Advantaged • Live Nation’s Vertical Integration and Near Monopoly Status on Ticket Distribution will Ensure that the Juggernaut will Roll On

Liberty is Planning to Unlock the Discount through Tracking Stocks for Sirius, Live Nation and Atlanta Braves

John Malone (an Outsider CEO) is Known for his Financial Ingenuity, Track Record

Malone Exerts Control over the Companies he Invests Providing Further Margin of Safety to Investors in Addition to the Discount to NAV

Liberty Media Corporation: Master Capital Allocator Behind a Free Cash Flow Machine