Liberty Interactive Goes On A Buying Spree

Dec.13.12 | About: Liberty Interactive (QVCA)

Another "John Malone" stock, Liberty Interactive (LINTA), not to be confused with his Liberty Media (NASDAQ:LMCA), is now also in the limelight. In one of the biggest insider buys of the week, Liberty added millions of shares to its interest in TripAdvisor (NASDAQ:TRIP) for a majority voting stake in the company. From an SEC filing Tuesday:

On December 11, 2012 Liberty Interactive Corporation ("Liberty") and TripAdvisor, Inc. ("TripAdvisor") announced that Liberty has purchased a total of 4,799,848 shares of common stock of TripAdvisor from Barry Diller and The Diller-von Furstenberg Family Foundation at a price of $62.50 per share. As part of the transaction, Mr. Diller's right to control the vote of the shares of TripAdvisor's common stock and Class B common stock that are beneficially owned by Liberty has been terminated and Liberty now controls a majority voting stake in TripAdvisor. Giving effect to the transactions, Liberty owns and controls 18,159,752 shares of common stock and 12,799,999 shares of Class B common stock of TripAdvisor, representing approximately 22% of the equity and 57% of the total votes of all classes of TripAdvisor common stock. Liberty has attributed the shares of TripAdvisor common stock that it owns to its Liberty Ventures tracking stock group.

TripAdvisor Class B common shares count as ten votes each, while the common stock counts as one vote. Diller will step down as Chairman of the Board, but will remain a non-employee director. The company will announce the new Chairman at a later date. His reason for turning over control to Liberty is that he has too much on his plate:

"Ever since we acquired TripAdvisor in 2004 it's been one of the smoothest and most trouble-free growth stories I've ever known," said Barry Diller. "During that time it grew from a startup with $23 million in annual revenues to a $5 billion plus public company with a global brand that operates the world's largest travel site. Its great progress has happened because of the superb talents of its co-founder and CEO, Steve Kaufer, and the team he leads. My only reason for resigning as Chairman and disposing of my interests is that I have more obligations than time and transferring control of TripAdvisor to Liberty is something I'm very comfortable with - Liberty has proven itself a fine steward and leader of its controlled businesses."

Shares of Liberty Interactive have been flat in comparison to Liberty Media which holds almost 50% of the very successful Sirius XM (NASDAQ:SIRI). The chart below shows that although TripAdvisor (green) is very volatile with wild swings in price over the last year, it is now up as much as Sirius for the year at 60%:

Chart forLiberty Interactive Corporation

However the TripAdvisor shares are tracked through the tracking stock Liberty Ventures (NASDAQ:LVNTA). Which paints a slightly different picture when compared to the other companies. Liberty Ventures tracking stock only goes back a few months. Its holdings include interests in AOL, Expedia, Interval Leisure Group, Time Warner, Time Warner Cable, (Lending Tree), TripAdvisor and some green energy investments:

Chart forLiberty Ventures (<a href='' title='Liberty Interactive Corp., Series A Liberty Ventures Common Stock'>LVNTA</a>)

Liberty CEO Greg Maffei said that they were glad to take over voting control of such a successful company as TripAdvisor, and it will make a great addition to the Liberty portfolio. There are other big names that own TripAdvisor besides Liberty. They include several Vanguard and Fidelity funds. According to Yahoo Finance, the top institutional holders are:

Holder Shares % Out Value* Reported
VIKING GLOBAL INVESTORS, L.P. 7,544,645 5.82 248,445,159 Sep 29, 2012
LUXOR CAPITAL GROUP, LP 6,438,130 4.97 212,007,620 Sep 29, 2012
VANGUARD GROUP, INC. (THE) 6,096,704 4.71 200,764,462 Sep 29, 2012
Coatue Management, LLC 5,964,668 4.60 196,416,517 Sep 29, 2012
LONE PINE CAPITAL, LLC 5,747,707 4.44 189,271,991 Sep 29, 2012
FMR LLC 5,597,777 4.32 184,334,796 Sep 29, 2012
PENNANT CAPITAL MANAGEMENT, LLC 4,456,550 3.44 146,754,191 Sep 29, 2012
STATE STREET CORPORATION 3,708,432 2.86 122,118,665 Sep 29, 2012
MAVERICK CAPITAL LTD. 3,426,573 2.65 112,837,048 Sep 29, 2012
PAR CAPITAL MANAGEMENT, INC. 3,315,279 2.56 109,172,137 Sep 29, 2012
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Top Mutual Fund Holders
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Holder Shares % Out Value* Reported
FIDELITY CONTRAFUND INC 3,820,110 2.95 163,806,316 May 30, 2012
COLUMBIA ACORN FD 1,325,000 1.02 43,632,250 Sep 29, 2012
VANGUARD MID-CAP INDEX FUND 1,316,782 1.02 58,846,987 Jun 29, 2012
VANGUARD TOTAL STOCK MARKET INDEX FUND 1,307,424 1.01 58,428,778 Jun 29, 2012
FIDELITY ADVISOR NEW INSIGHTS FUND 905,400 0.70 38,823,552 May 30, 2012
VANGUARD 500 INDEX FUND 858,357 0.66 38,359,974 Jun 29, 2012
CALAMOS GROWTH FUND 855,000 0.66 31,985,550 Jul 30, 2012
SPDR S&P 500 ETF Trust 790,710 0.61 33,905,644 May 30, 2012
HARTFORD MID CAP FUND 693,030 0.53 29,717,126 May 30, 2012
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According to Trefis, shares of TripAdvisor fell dramatically after the Q2 results were released. However, they see a lot of future potential in the company, since the 3Q results. Keep in mind that their article was written before the news broke that John Malone had made this agreement with Diller:

TripAdvisor offers its content in 21 different languages with more than 60 contributions per minute, which equates to over 30 million contributions in a single year. As per its recent earnings call transcript, TripAdvisor now has over 36 million members, a 70% y-0-y increase. As the company continues to prioritize traffic diversification, focuses on international expansion, and targets higher hotel shopper growth, we believe it will continue to register growth in its user base for years to come. If the user base increases to 150 million, instead of the 124 million we currently forecast, there would be 10% upside in our price estimate for TripAdvisor (of $38).

There is still a lot to learn about these companies going forward. If you are interested in buying into this deal with John Malone, be sure to do your own due diligence. But there are a lot of investors that believe Malone can do no wrong. And following what the insiders are doing can pay off big time. As they say "I'll have what he's having".

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.