john malone

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Liberty Ventures: not that interesting at $40

Now that Ventures (see old writeup) is trading, it seems that its price is fair and not particularly undervalued.  (I don’t know if I made a mistake as to Venture’s cash balance and how the cash payment on the Motorola debt was handled.  Ventures may have ended up with more cash than I thought it would.)

So last time I checked, Ventures had a liquidation value of around $643M.  There are roughly 28.6M shares out Ventures outstanding (both A and B, pre-rights offering; the number may be a little off due to buybacks).  Ventures at $44.85 gives a market cap of $1.56B.  You can divide by 0.9375 to account for the dilution from the rights offering… this gives an adjusted market cap of $1.664B.

The difference between $1.664B and $0.643B can be thought of as the discount on Ventures’ various deferred tax liabilities.  That’s a $1021M discount on $2,435M of total deferred tax liabilities.  To put it another way, the market is saying that the $2,435M Ventures will have to pay in tax is worth about $1,414M right now.  (Or you can say that it is similar to $1,414M in debt with a 8% interest rate due in 7.06 years.  Or 6% interest rate debt due in 9.3 years.)

At $20-30 I will probably get interested in Ventures.  I guess I am disappointed that it is trading so high.  This memo to Liberty Interactive employees suggested a trading price of $20 for LVNTA shares (“20.0  LVNTA Market Price post-distribution”).  Damn you efficient markets.

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Special situation opportunity: Liberty Ventures

Thesis: Liberty Ventures stock may be undervalued when it starts trading due to its complexity and misleading balance sheet.  Ventures has a stated book value of -$1,9871M.  After adjusting for the market prices of its investments and its anticipated cash balance, Ventures would have an adjusted book value of around $570M.  Making adjustments for its deferred tax liabilities will add a few (to several) million dollars on top of that.

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