LSXMA is trading at a discount

Liberty SiriusXM Group (LSXMA/B/K) is trading at roughly a 27% discount to its NAV.  The latest investor presentation discusses the discount:

As LSXMA is actively taking advantage of the discount by buying back shares, the discount should resolve in due time.  In the past, LMCA traded at a discount to the DTV (DirectTV) shares that it owned and that trade worked out well.

My Google Sheets calculations are here (it is updated with LSXMA/B/K’s latest share prices).  Use File –> Make a copy to edit it.  I own LSXMA shares.  This is a bet on the NAV discount narrowing as well as a bet on Sirius XM (SIRI) itself.

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CWC merger / John Malone liked LiLaC more than Global

I tried to figure out what the CWC merger structure was about.  You can access my spreadsheet here: https://docs.google.com/spreadsheets/d/1c_31Z-eoxXAPc1TfeOMjgdirZu-nk54DHwGKXSlOao8/edit?usp=sharing

Summary:

  • The way the merger is structured is that the Recommended Offer gives you the most value from a merger arbitrage perspective.  However, you will get a very low mix of LiLaC shares.  What Malone is doing here is luring institutional investors into taking a high proportion of Global shares rather than taking (relatively) undervalued LiLaC shares.
  • Since the merger details were announced, Liberty Global has fallen by about a fifth.  So you should do your own homework as to the relative valuation between Global and LiLaC.

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Live Nation (LYV) – Part 1 – Ticketing overview

Live Nation has various business lines associated with live music and live events.  They are pursuing a strategy of vertical integration, trying to find synergies between the various parts of their business.  On the concerts business side, the vertical integration strategy has been tried multiple times with little success.  Will this time be any different?  John Malone seems to think so.  Liberty Media has been buying more Live Nation shares.

Let’s start with an overview of the ticketing industry.

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Ocwen/Altisource: What went wrong

Lessons learned:

  1. Regulators are difficult to predict.
  2. Don’t underestimate the amount of damage that a regulator can do.
  3. Use small position sizes for companies with potentially nasty regulatory risk.

While I was always aware of #1, #2 is what really got me into trouble.  Due to the actions of the NY DFS, I do not see the subprime mortgage servicing industry as an attractive one.  Lawsky may succeed in regulating away the industry’s profitability and crippling the growth of subprime servicers.

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Notes on cable – Part 2 – The future

I think that it’s likely the following trends will play out in the future:

  • On-demand television will become widespread because it is the most compelling delivery mechanism.
  • Technologies incapable of on-demand viewing (terrestrial broadcasting, satellite) will become less profitable.
  • High-speed Internet providers (cable and telcos) will be able to exercise increasing pricing power over their customers.

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