Author Topic: GLIBA/LVNTA - GCI Liberty  (Read 101446 times)

Olmsted

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Re: LVNTA - Liberty Ventures
« Reply #10 on: August 18, 2012, 06:42:07 PM »
Well I must say that this discussion is getting to be really fun.

Btw Olmsted, you linked to my blog.  :)  That is me.

Good stuff!  I read through all the posts in the last couple days, enjoyed them mightily. 

1b- On a superficial look at LINTA, the e-commerce side seems just ok.  I feel like the ecommerce/Internet retailing market as a whole has grown faster than Interactive's... but I am not 100% sure.  Certainly, Amazon and Google (their ad revenues is mainly from online retailers in my opinion) have grown faster than Interactive's ecommerce.

On the other hand, and in contrast to Amazon, it seems that QVC actually has a nonzero profit margin and generates free cash flow (imagine that!).

I believe he made a mistake on the value of Ventures' stocks... you need to account for the tax that needs to be paid on them as their market values are far above their carrying values and their cost basis.

In terms of the cash, he may or may not be counting things twice.  e.g. EXPE and TRIP shares were sold... you need to be careful not to count the shares *and* the cash from the sales.

Yes, I remember G. Maffei saying that the extra cash that ended up at Ventures was the result of turning EXPE and TRIP into liquidity (paraphrasing).  It would be important in that case not to double-count the shares as claimed in the S-4 AND the extra cash.  I didn't mark my valuation up by $300m once I heard that Ventures was splitoff with $1.6bn cash vice $1.3bn. 

Also, it will be interesting how they treat the gain on sale as they sell those off - it may give us some insight as to how/if they are able to shield some of those capital gains.  I am a bit torn how to treat taxes on Ventures' current holdings as well as the DTLs.  For the sake of conservatism, I like the liquidation valuation you have done.  I do get the feeling that it is a bit draconian.  (And it is only a feeling - I back it up with no real evidence.)  I will be the first to admit they I do not have enough tax expertise nor visibility into the actual instruments (debentures, derivatives, et al.) to really pin down a good estimate.

Given the nature of Lvnta collection of assets, is that a collection that people would want to own, or have to own? I would say neither. It's structured in a way to make people not want to deal with it.

Given that it was spun off in early august into a dull market with little fanfare and zero media attention, is that more likely to produce a security that is fairly valued or undervalued? I would guess undervalued.

Given the size of the company (small cap) and the small number of shares outstanding, and people not wanting to mess with a rights offering, does that make it more or less likely that larger institutions would sell lvnta or hold it or buy it? I would guess Sell it.

Given that there are no sell side analysts really sponsoring this thing with very little incentive to do so, does that make it more likely it would be undervalued or fairly valued? I would say undervalued.

All good observations, and I think you have pinpointed the reasons why we oddballs are looking into it!  Qualitatively, this has all the attributes of a great opportunity.  It would be nice if we could have the same quantitative confidence. 
« Last Edit: August 18, 2012, 06:43:58 PM by Olmsted »


ItsAValueTrap

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Re: LVNTA - Liberty Ventures
« Reply #11 on: August 18, 2012, 11:31:59 PM »
Amazon:  It looks like technically they had negative free cash flow (profit + D&A - capex).  But without the impairment they would have had positive free cash flow.  Though it's definitely interesting to note that their profits aren't that great.

The DTLs at LVNTA:  I guess this is something I struggled with.
1- What is the correct discount rate for the tax liabilities?
2- When do the DTLs expire?
Both 1 and 2 are inter-related.  If you can be certain that the DTLs won't expire early/prematurely then they are worth more.

I guess you can see the DTLs as a form of debt.  How good a form of debt is it?
a- No covenants... unlike the exchangeable debentures or QVC debt.
b- Limits ability to liquidate assets if you want to keep the DTL loan/"debt".  Though there are tax efficient ways of "selling" assets.
c- No interest

On second thought, maybe you should apply a discount rate of 7-8% to some of the deferred tax liabilities... maybe even a little higher.  You could make the argument that it is similar in risk to the other kinds of debt that Liberty takes on (which have interest rates in that 7-8% range).

The comparable yield on some of the exchangeable debentures is a little over 9%.

---
Breaking it down asset by asset:

Trip:  DTLs not worth much if Ventures will liquidate the Trip stake quickly.  Liberty outright sold some Trip shares in the open market.
Expe:  Same idea.  I think Ventures will work hard on liquidating these stakes in a more tax efficient manner, like the forward sale on Expe shares.  BUT, these stakes are very large and it will be hard to buy derivatives (or sell convertible debentures) for such large stakes.

Time Warner:  The shares probably won't be liquidated for a while.  The exchangeable debentures can be settled in cash.
Time Warner Exchangeable debentures:  Will likely be settled several years from now.  I don't think that they will be put early.

Sprint exchangeables:  Ventures may buy a little bit of them back early.  I don't think the liquidity exists to buy all of this series back.

Motorola exchangeables:  I don't see these being bought back unless their price drops a lot (which is good for Ventures anyways).  I don't see the put or call feature being exercised early.

Tax liabilities from debt repurchases in the past:  These will be due in a few/several years.

---
I guess if you break it down that way, then I might be underestimating the discount that should be applied to the DTLs by a lot.

A lot of them won't be due for a while and I should probably use a higher discount rate.
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Olmsted

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Re: LVNTA - Liberty Ventures
« Reply #12 on: September 12, 2012, 09:24:50 AM »
For those still watching, the terms of the rights offering was set Friday with exercise price at $35.99, expiring 9 October.  The rights are trading today with the ticker LVNAR.  The arbitrageurs are all over this, nailing the spread between rights and LVNTA pretty closely. 

There is an opportunity to oversubscribe.  It looks like the market is anticipating all rights will be exercised, and there will be no oversubscription.  If you think otherwise, there might be an arbitrage opportunity in the rights at this moment (i.e. sell common short, buy equal number of rights, oversubscribe - and if you get an overallotment it's pure profit).  Not my game though.


http://ir.libertyinteractive.com/releasedetail.cfm?ReleaseID=705705

no_free_lunch

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Re: LVNTA - Liberty Ventures
« Reply #13 on: August 18, 2013, 07:21:48 AM »
Sumzero had a write-up on LINTA.  The analyst thinks it could hit $38 (or 70%+) in next 2 years.

https://sumzero.com/headlines/consumers_and_retailing/LINTA/188-liberty-interactive-misunderstood-qvc-assets-mask-growing-upside

I spent a few hours on it and am just not as convinced as the author but I thought it was worth posting.  The company's growth rates are okay but nothing special.  I compared the valuation to traditional retailers and the valuation doesn't seem particularly cheap, sure it could go up 20-30% but I don't see any reason it would.   The only real positive I see is malone's involvement and the possibility for QVC expansion overseas.

ItsAValueTrap

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Re: LVNTA - Liberty Ventures
« Reply #14 on: January 04, 2014, 11:52:39 PM »
I don't know if anybody is still interested in this stock, but this website explains the tax benefits of green investments:
http://www.woodlawnassociates.com/tax-equity-101/

I don't know if Ventures is pursuing those types of deals.
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jay21

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Re: LVNTA - Liberty Ventures
« Reply #15 on: May 13, 2014, 06:13:25 PM »
S-1: http://www.sec.gov/Archives/edgar/data/1606745/000104746914004609/a2220025zs-1.htm

"Q:
What transactions are occurring in connection with the Spin-Off other than those involved in the internal restructuring?

A:
In connection with the Spin-Off, a bankruptcy remote wholly-owned subsidiary of TripCo (TripSPV) intends to borrow up to $400 million in cash in margin loans (the Margin Loans), secured by our ownership interest in TripAdvisor, which will be held through TripSPV, and guaranteed by our company, from one or more third parties (the proceeds from such borrowing, the Loan Proceeds). As part of the internal restructuring, approximately $350 million of the Loan Proceeds will be distributed from TripCo to Liberty, and Liberty, within twelve months following the completion of the Spin-Off, will use all of the distributed portion of the Loan Proceeds received from TripCo to repurchase shares of Liberty common stock under its share repurchase program pursuant to a special authorization by Liberty's board of directors. See "Description of Certain Indebtedness."

"In 2012, Liberty recapitalized its common stock into two new tracking stocks: the Liberty Interactive Group and the Liberty Ventures Group, for the purpose of creating greater transparency for the assets and liabilities attributed to each group, among other reasons. Although the public markets have responded favorably to these two tracking stocks, Liberty believes that a meaningful trading discount continues to apply to the underlying value of the businesses and assets attributed to its Ventures Group. Liberty believes that the Spin-Off will result in a higher aggregate trading value for our common stock and the Liberty Ventures common stock as compared to the trading price of Liberty Ventures common stock without the Spin-Off. The asset-backed nature of our stock is expected to provide greater transparency for investors with respect to our dominant business, our investment in TripAdvisor, which should result in greater focus and attention by the investment community on this business. The Spin-Off is also expected to enhance our ability to issue equity for strategic acquisitions and other business combinations by creating a more efficiently priced equity security and enable us to more effectively tailor equity incentives for our management and employees with less dilution to public stockholders. In addition, Liberty believes that separating our company from Liberty's other businesses will help facilitate a potential combination of our company with TripAdvisor by eliminating any negotiations regarding the valuation of Liberty's other businesses, thereby making it more likely that a potential agreement could be reached. Liberty believes that a combination of our company with TripAdvisor could be beneficial for our stockholders, on the one hand, and TripAdvisor, on the other hand, by eliminating the control of a large stockholder and the overhang associated with the current dual-public company structure. No assurance can be given that any investment, acquisition or other strategic opportunities will become available following the Spin-Off on terms that TripCo finds favorable or at all, nor can any assurance be given that a combination of TripCo and TripAdvisor will ever occur."
« Last Edit: May 13, 2014, 06:15:05 PM by jay21 »
@jay_21_

Yours Truly

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Re: LVNTA - Liberty Ventures
« Reply #16 on: May 13, 2014, 08:51:19 PM »
It seems like we are back in 2012 again buy this time there is much more to choose from within the Malone empire of special situations!

It looks like both LINTA and LVNTA did real well after the split posting close to 1-bagger and a 2-3 bagger respectively in 1.5 years.

ItsAValueTrap

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Re: LVNTA - Liberty Ventures
« Reply #17 on: May 13, 2014, 09:15:07 PM »
It seems like LVNTA did quite well due to TRIP.  If you plot the two stocks against each other on Google, they line up pretty well.

I didn't understand that the green energy tax breaks are really good deals for companies that throw off a steady stream of cash.  Apparently they have equity-like IRRs without equity-like risk.
Apparently a lot of companies avoid tax equity because they have to take risk in green energy projects, otherwise the tax breaks won't work.  So they have to understand an industry they know little about.  (??)
« Last Edit: May 13, 2014, 09:22:47 PM by ItsAValueTrap »
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ItsAValueTrap

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Re: LVNTA - Liberty Ventures
« Reply #18 on: May 13, 2014, 09:35:16 PM »
Here is Malone selling LINTA and LVNTA shares:
http://www.sec.gov/Archives/edgar/data/937797/000122520813017672/xslF345X03/doc4.xml

August 8, 2013
sold about $7.8M in LINTA
sold about $5.1M in LVNTA
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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Yours Truly

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Re: LVNTA - Liberty Ventures
« Reply #19 on: May 14, 2014, 04:25:17 AM »
Here is Malone selling LINTA and LVNTA shares:
http://www.sec.gov/Archives/edgar/data/937797/000122520813017672/xslF345X03/doc4.xml

August 8, 2013
sold about $7.8M in LINTA
sold about $5.1M in LVNTA

How much as a % of overall shares owned by Malone does that represent?