Author Topic: LMCA - Liberty Media  (Read 461451 times)

WayWardCloud

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Re: LMCA - Liberty Media
« Reply #1320 on: April 26, 2020, 05:41:41 PM »
I think even they didn't know the pandemic was coming.

I didn't mean to say that they should have seen the pandemic coming, nobody did. But one can safely predict that some unpredictable shit will eventually happen to their business and choose to wear swim trunks even though the tie is high.

All 3 are short-term impaired. But why are you not so bullish on Sirius XM? Of the three, it seems to be the least impacted by the coronavirus. All three are , but that one the least.

Oh yeah, nothing to do with the virus indeed.
I try to think of investments with a 5-10 years timeline in mind.

I believe satellite radio is an inferior technology with secular headwinds blowing stronger against it every day because it's a low-bandwidth high-latency one-way connection. I'm concerned SIRI could be the next QVC: high FCF + leverage works great until your boomer clientele starts dying off. I'm surprised SiriusXM hasn't yet reached its plateau followed by a decline but in my mind it's only a matter of time.

Malone has a history of never calling quits on melting ice cubes that are optically cheap. Here is what I picture could happen. When user growth eventually starts stalling, the stock will re-rate down to a more humble PE ratio. This will make it look cheap on a P/FCF basis. After all, even without growth, this thing is still minting money every month. So management decides to buy tons of shares back. Except the stock keeps getting cheaper and cheaper because now the user base is actually shrinking. At this point the PE ratio adjusts again and becomes absolutely mouth watering... All the earnings are plowed into buybacks instead of dividends which only ends up magnifying the fall. Value investing blogs are calling it a no-brainer, especially with all the wonderful hidden assets from their library coming in for free. The end.
« Last Edit: April 26, 2020, 06:39:43 PM by WayWardCloud »


scorpioncapital

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Re: LMCA - Liberty Media
« Reply #1321 on: April 27, 2020, 01:36:33 AM »
You know, I have observed this with several malone companies (including cable broadband). A technology that pumps out tons of cash but there are rumblings on the horizon of new technologies and methods. I guess it really is a bet that they 'get out' by selling or shifting capital at the right time to the new technology or a new field entirely. If one doesn't have this confidence it could be as you say, a slow motion wind-down with frustrating returns. I guess in this sense , the ownership of 33% of LYV in the tracker is a good thing, at least you get a better business. Or as you say you can just buy LYV. I found it a bit weird in the presentation that LXSMA is going to end up with 2% of formula 1 as well! Also many people are saying they might go from 72% of Sirius to 100% but if what you are saying is true, perhaps they want to go the other way and sell down from 72% to 50% or below.
« Last Edit: April 27, 2020, 01:39:01 AM by scorpioncapital »

merkhet

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Re: LMCA - Liberty Media
« Reply #1322 on: April 27, 2020, 06:25:21 AM »
You know, I have observed this with several malone companies (including cable broadband). A technology that pumps out tons of cash but there are rumblings on the horizon of new technologies and methods. I guess it really is a bet that they 'get out' by selling or shifting capital at the right time to the new technology or a new field entirely. If one doesn't have this confidence it could be as you say, a slow motion wind-down with frustrating returns. I guess in this sense , the ownership of 33% of LYV in the tracker is a good thing, at least you get a better business. Or as you say you can just buy LYV. I found it a bit weird in the presentation that LXSMA is going to end up with 2% of formula 1 as well! Also many people are saying they might go from 72% of Sirius to 100% but if what you are saying is true, perhaps they want to go the other way and sell down from 72% to 50% or below.

Liberty SiriusXM is taking on a 2023 convertible from Formula One with exposure to LSXMA, FWONA, and BATRA. The transfer of the Formula One & Braves stock is meant to cover that eventual exposure.

merkhet

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Re: LMCA - Liberty Media
« Reply #1323 on: April 27, 2020, 06:52:43 AM »
For Formula One, despite all the talk about an acquisition, I don't know that the balance sheet transfer was based on that -- there's talk about Formula One needing to provide assistance to the teams, promoters, etc. to make sure that the ecosystem can make it to the end of the tunnel. Some of these teams are attached to large corporations that can support them (Mercedes, Ferrari, etc.) but some of them are not (Haas, Williams, etc.). The promoters are likely very screwed even if the races open up because they'll likely do the first few races without fans, so there's no tickets, no corporate hospitality, etc.

Munger_Disciple

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Re: LMCA - Liberty Media
« Reply #1324 on: April 27, 2020, 10:06:11 AM »
Oh yeah, nothing to do with the virus indeed.
I try to think of investments with a 5-10 years timeline in mind.

I believe satellite radio is an inferior technology with secular headwinds blowing stronger against it every day because it's a low-bandwidth high-latency one-way connection. I'm concerned SIRI could be the next QVC: high FCF + leverage works great until your boomer clientele starts dying off. I'm surprised SiriusXM hasn't yet reached its plateau followed by a decline but in my mind it's only a matter of time.

Malone has a history of never calling quits on melting ice cubes that are optically cheap. Here is what I picture could happen. When user growth eventually starts stalling, the stock will re-rate down to a more humble PE ratio. This will make it look cheap on a P/FCF basis. After all, even without growth, this thing is still minting money every month. So management decides to buy tons of shares back. Except the stock keeps getting cheaper and cheaper because now the user base is actually shrinking. At this point the PE ratio adjusts again and becomes absolutely mouth watering... All the earnings are plowed into buybacks instead of dividends which only ends up magnifying the fall. Value investing blogs are calling it a no-brainer, especially with all the wonderful hidden assets from their library coming in for free. The end.

+1

Excellent post. I would also add that almost all Liberty entities have huge debt loads due to Malone's mantra of "tax advantaged levered free cash flow growth". However this strategy makes Liberty entities very fragile and susceptible to external shocks like COVID-19. For instance compare Berkshire to Liberty Media. Both businesses are affected greatly by COVID-19 but Berkshire is a fortress with $128B in cash and will have no trouble getting through COVID-19 interruptions unlike LMCA entities like F1.

scorpioncapital

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Re: LMCA - Liberty Media
« Reply #1325 on: April 27, 2020, 10:12:24 AM »
Covid is not good for any non essential business. Many Malone companies (except perhaps Cable) are non-essential entertainment, leisure business. I was quite clear these would not do well in a pandemic. But then again, if the entire world of business was only essential stuff it would be a pretty limited world of commerce. I think even in those post-Apocalyptic movies they still had various types of 'games'. So I'm encouraged that humans are not going to be house to food forever.

https://seekingalpha.com/news/3564653-live-nationplus-2_9-saudis-take-5_7-stake

Hmm I wonder if Maffei knew this was coming when he struck that 1 year call option on LYV for F1 group tracker? )
« Last Edit: April 27, 2020, 10:14:17 AM by scorpioncapital »