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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LMCA and LBRDA valuation spreadsheets

LMCA: https://docs.google.com/spreadsheets/d/1Jh4eIMnqoVPMmfSnhzCPmHca8_aKgzdzHafYVxMERbw/edit?usp=sharing

LBRDA: https://docs.google.com/spreadsheets/d/1g1ZIuZWFOS5ep6CsKR0el-Icz6c1R_tGUpip0bsJVtA/edit?usp=sharing
See Liberty Broadband valuation spreadsheet.

Important caveats:

  1. Google Finance might lag behind real-time quotes.
  2. My spreadsheets often contain errors in them.  I make a lot of mistakes.
  3. The valuation of some assets is subjective.  These should be highlighted with a light red background.
  4. Not all of the prices in the LMCA spreadsheet are updated.  The prices for non-American publicly-traded stakes are old.

Links

LMCA/LMCK share class arbitrage

Portfolio update November 2014

Overall, my portfolio is down several percent YTD mainly due to a longshot bet on Yongye put options and mark-to-market losses on Altisource common shares.

On the short side, shorting common stock has worked incredibly well for me this year.  Unfortunately, my gains were offset by losses on Yongye puts.

On the long side, I made massive bets on Kinder Morgan warrants and Altisource common stock.  The former has been profitable while the latter hasn’t.  Altisource has been beaten down -53% YTD and I have been adding to my position on the way down.  While Altisource continues to have absurd earnings growth, its share price has fallen dramatically due to fears that regulation may hurt the company.

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LMCA/LMCK share class arbitrage

LMCK shares have no voting power while LMCA shares do.  In theory, LMCA shares are worth more than LMCK shares and should therefore trade at a premium.  Right now, the opposite is true.

Class A:  Ticker symbol LMCA.
Class B: Ticker symbol LMCB.  These shares have the most voting power.  These shares are highly illiquid.
Class C: Ticker symbol LMCK.  Non-voting.

In theory, you can arbitrage these shares by shorting LMCK and going long LMCA.  I would not recommend that particular trade because I’m not a fan of share class arbitrage in general.  But if you enjoy risky arbitrage trades that may take years to work out, there are better share class arbitrage opportunities out there.  For example, the spread is dramatically higher with LEN and LEN.B (18.7% versus 0.6%).

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(LMCA) Liberty Broadband spin-off

Liberty recently completed the distribution of 2 class C non-voting shares (ticker symbol LMCK) for each LMCA or LMCB share.  Now Liberty intends on completing its spinoff of Liberty Broadband (LBRDA/B/K).  Each shareholder of LBRDA/B/K will be slated to receive rights (LBRKR) to purchase shares of LBRDK.  Liberty Broadband’s S-1 was filed on July 25.

To summarize:  I think that both the parent and the spinoff will be attractive stocks.  I plan on owning both.  It could make sense to be overweight Liberty Broadband.

Both parts will essentially consist of high quality businesses with high growth (Sirius XM and Charter).  I don’t believe that this spinoff will result in a special situation where one piece will contain significantly better assets than the other piece.  I think that it is a better idea to own both rather than just Liberty Broadband.  Because there will be a lot of leverage underlying the companies, it is probably a good idea to diversify.

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