It was a very busy week for Liberty Media (NASDAQ:LMCA). The company closed two forward purchase contracts, announced a date and time for its Q2 conference call, and is making headlines with its involvement in Sirius XM (NASDAQ:SIRI). Ironically Liberty stock has performed better on the more recent news than it did when the street learned of a $1 billion court victory against Vivendi!
When you look at Liberty Media what is not to like? The company is making some substantial moves, has plenty of cash, and is positioned to seek out new deals should they arise.
On the Sirius XM front Liberty's CEO John Malone has ended his silence and is beginning to take his quest for control to the press. Some may see this as weakness, but given the Malone track record, he likely has other reasons. One of those reasons may well be clarity. Malone wants it known in no uncertain terms, especially by the FCC, that he is willing to go to de jure control of Sirius XM should the commission require it. With already a 46.2% stake under his belt, the media mogul is merely a hop, skip, and jump away from 50% ownership. With the issues of premium coming up, Malone made it clear that it is he and Liberty that want a premium in a deal.
Needless to say there is a lot of posturing happening. Some of it very public, while some of it is more subtle. I have not seen it brought up, but Liberty Media announced its earnings date to be a day after Sirius XM. Last quarter Liberty went second as well, and that is when the bombshells of forward contracts and additional share purchases in Sirius XM were brought to the public eye. It would appear that once again Liberty Media will let Sirius XM go first, and then follow up with its own take the next day.
While many who read this will have a focus on Sirius XM, there is another interesting play happening and it to involved a forward purchase contract. Liberty Media just closed an additional 9.5 million share purchase of Live Nation (NYSE:LYV) which will take its stake to 25%. Further, Liberty already has regulatory approval to move to a 35% stake if it desires. Malone has gone so far as to say that he would like to see Live Nation taken private. Clearly Malone has a plan of some sort in the works.
With Sirius XM, Malone has gone a bit deeper recently than ever before and the tone has changed slightly. In the past, when asked about Sirius XM and management there Malone would be complimentary in nature. Sirius XM CEO Mel Karmazin even used that as a selling point to investors stating that when Malone was asked if he would change anything about Sirius XM, he said nothing. Now it appears that perhaps Malone may have bigger plans that include a greater focus on technology, more exclusive non-music content, and even perhaps taking an Internet streamed version of the service on an expansion tour. These are the types of comments that, had they come from the mouth of Mel Karmazin, would send investors into an excited frenzy. Alas though, the "big, bad John Malone" said them, and it is seen a weakness to that same group.
I find it interesting that so many of the passionate long term Sirius XM investors carry despise for John Malone. Investors in Live Nation seem to be indifferent to the moves of Liberty. They are just sitting back and enjoying the ride. Malone is a visionary. That is a good thing in many ways.
The good news for Sirius XM investors is that Sirius XM has a good business model that can flourish under the control of Mel Karmazin or Liberty Media. Personally I do not really care who runs the company as long as they have a vision and can run it in a profitable manner. I do not always align with management of Sirius XM, but the same holds true with Liberty Media. On one hand I think fresh blood could do the satellite service well. On another, the unknowns can be scary.
One certainty here is that Sirius XM is getting ready to announce a very good quarter. That means that Liberty media will be able to do the same. A substantial part of the Liberty performance is its investment in Sirius XM. For that reason alone it is little surprise that Liberty is trading at highs and from a technical standpoint ready to pop through $100 giving a possible 10% to 15% upside from current levels and an impressive 25% gain from a month ago.
Watch this company closely going into earnings. The stage is set for Liberty to impress (with a special thanks to Sirius XM).
Additional disclosure: I have no position in Live Nation