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
