Liberty Media (NASDAQ:LMCA) has filed a lengthy Registration Statement with the SEC regarding the proposed spin and separation of Liberty Media and Starz. While there is certainly a lot to consider, one juicy piece of information relates to a dividend of 1 share for each share held. That is quite substantial no matter how you slice it!
While the spin is oft viewed as a spinoff of Starz from Liberty Media, it is actually the other way around. Liberty Media is spinning from Starz. The document has some heavy reading that can be confusing, but once you wade through it all, you will likely be a happy investor if you have Liberty stock. If you don't, there is still time to hop in.
Here is some detail:
Liberty Spinco, Inc. ( Spinco ) is currently a subsidiary of Liberty Media Corporation. Liberty Media Corporation has determined to spin off our company by distributing (the distribution) to its stockholders, as a dividend, all of our common stock. We are sending this information statement to you in connection with that spin-off (the Spin-Off). Following the Spin-Off, we will be primarily engaged in the media, communications and entertainment industries through our operating subsidiaries and investments in various publicly-traded companies.
If all conditions to the Spin-Off are satisfied or waived by the board of directors of Liberty Media Corporation in its sole discretion, at 5:00 p.m., New York City time, on [ ], 2012 (such date and time, the distribution date), (NYSE:I) for each whole share of Liberty Media Corporation's Series A Liberty Capital common stock ( LMCA) held by you as of 5:00 p.m., New York City time, on [ ], 2012 (such date and time, the record date) you will receive one share of our Series A common stock and (ii) for each whole share of Liberty Media Corporation's Series B Liberty Capital common stock (LMCB, and together with LMCA, the Liberty Media common stock) held by you on the record date you will receive one share of our Series B common stock.
Confused yet? Simply stated, for each share of Liberty Media stock a holder has they will receive another share. Essentially there is a spin-off happening and an all stock dividend will happen as part of the deal. If you hold Liberty Media stock, your shares will double. Bear in mind, that absent Starz, the stock will adjust in value. In my mind though, it will not be cut in half. Now that we have a little clarity let's get to the real confusing part.
"In connection with the Spin-Off, Liberty Media Corporation will be renamed "Starz," and Liberty Spinco, Inc. will change its name to "Liberty Media Corporation." Throughout this information statement, we refer to Liberty Media Corporation prior to the Spin-Off as Liberty Media and following the Spin-Off as Starz ."
Remember when I said that the spin is actually Liberty spinning itself from Starz? This is where that comes into play. What we all think of as "Liberty Media" is actually the Spinco. No vote of Liberty Media's stockholders is required to authorize or effectuate the Spin-Off. No action is required of you to receive your shares of our common stock. Still confused? Read on:
There is no current trading market for our common stock. We expect to list our Series A common stock and Series B common stock on the Nasdaq Global Select Market under the symbols "LMCA" and "LMCB," respectively, which are the current trading symbols for Liberty Media's Series A and Series B Liberty Capital common stock, respectively. Following the Spin-Off, Starz will change the symbols of its Series A and Series B Liberty Capital common stock to "STRZA" and "STRZB," respectively. For a short period of time following the Spin-Off, our common stock will trade under temporary trading symbols, which will be announced by press release once available.
The bottom line is that if you hold 1,000 shares of LMCA today you will have 2,000 shares after the spin. You will now be invested into a Liberty Media that is separate from Starz. Liberty Media (Spinco) holds positions or ownership in many companies.
Following the Spin-Off, the principal businesses and assets will include the consolidated subsidiaries Atlanta National League Baseball Club, Inc. and TruePosition, Inc., equity affiliates Sirius XM Radio Inc. and Live Nation Entertainment, Inc. and minority investments in public companies such as Barnes & Noble, Inc., Time Warner Inc., Time Warner Cable Inc., Viacom Inc. and Sprint Nextel Corporation.
For Liberty stockholders the news gets even better.
In connection with the Spin-Off, it is expected that Starz, LLC will distribute approximately $1.8 billion in cash to Liberty Media, of which $400 million was distributed in the third quarter of 2012. The total amount of the distribution will depend upon the financial performance and cash position of Starz, LLC prior to the Spin-Off. This distributed cash, as reduced by investments of such cash prior to the Spin-Off, will be contributed to Spinco in connection with the Spin-Off.
The new Liberty Media will be rich with cash as well. All in all, there is a proverbial payday coming to Liberty Media shareholders. The spin will also help mitigate the trading discount associated with Liberty Media stock as the stock price is not really reflective of the underlying interests Liberty media has.
Should you hop into Liberty Media? That is an investment decision that each person needs to make on their own. What I can say is that I am glad that I sold half of my stock in Sirius XM (NASDAQ:SIRI) in order to invest in Liberty in late Spring of this year. Investors interested should read the Liberty filing to better understand all of the dynamics at play.
Disclosure: I am long LMCA, 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.