Some Liberty Media (LMCA) (NASDAQ:LMCB) (LMCK) investors were likely a bit shocked Monday when they looked at the price per share of Liberty and saw that it was down 50%. The issue also had some SiriusXM (NASDAQ:SIRI) investors thoroughly confused. The simple answer is that Liberty did not tank. Far from it. Liberty actually reclassified its shares and created a SiriusXM tracking stock as well as an Atlanta Braves tracking stock.
This reclassification can be a bit confusing. That is because Liberty already had various classes of stock. Liberty had voting shares, super voting shares, and non-voting shares. Each of these classes of shares had different symbols on the stock exchange. In order to keep things simple, I will spell out what happened with the voting shares.
If you had 100 shares of Liberty Media's LMCA stock you closed the day on Friday, April 15th with an account value of roughly $3,900. Today your account would now have three stocks in it, and the number of LMCA shares will have decreased. Here is what happened:
- Each LMCA share was reclassified into 1 shares of Liberty SiriusXM (NASDAQ:LSXMA) stock, .25 shares of Liberty Media stock , and .1 shares of Liberty Atlanta Braves (NASDAQ:BATRA) stock.
Hopefully that explanation is satisfactory for most, but to keep it visual, I will break it down using the theoretical 100 shares of Liberty Media stock you might have owned on April 15th. The reclassification happened when the market opened on April 18th. Your 100 shares would now look like this:
- 100 shares of LSXMA
- 25 shares of LMCA
- 10 shares of BATRA
With the first day on the market these respective shares closed at the following:
- LSXMA - $31.20 for a value of $3,120
- LMCA - $19.03 for a value of $475.75
- BATRA - $19.95 for a value of $199.50
The total value of the mix is $3,795.25 or down about 2% from where the LMCA stock was on April 15th. Being down a bit on the confusion is not anything to raise alarm bells about. In reality, this is where the opportunity actually begins.
By creating tracker stocks Liberty Media actually allows pent up value to get unlocked. If you think about what was done you will quickly see why the move had brilliance behind it.
The bulk of the Liberty Market cap was actually almost equal to its stake in SiriusXM. This meant that there were entities within Liberty that were actually being tapped into at a substantial discount. By creating a satellite radio tracker, Liberty actually allows values of other entities to blossom. Meanwhile, when Liberty makes its next play for SiriusXM, it can do so with Liberty SiriusXM non-voting stock (NASDAQ:LSXMK). I anticipate that Liberty will use the non-voting stock as the method because essentially SiriusXM shareholders do not have real voting power now. Liberty controls 61% of the stock and 61% of the votes. Why would Liberty give votes when they really do not have to?
Next I will offer why the Atlanta Braves tracker is smart. The Atlanta Braves may not be among the top tier of teams at the moment, but they have something that many other teams do not have. The Braves are on the cusp of opening a new stadium. The value of a franchise usually hits a peak when the club opens up a new stadium. Over the next year, we could see the valuation of the Braves increase substantially. A new stadium usually brings new season ticket holders, and certainly brings visitors that simply want to see the new stadium. Liberty creating a tracker with the Atlanta Braves was smart. This stock could see good appreciation over this year, and could see pretty substantial added value with the new stadium.
The bottom line is this. Liberty Media is making moves, and when Liberty makes a move it usually makes investors money. Stay Tuned!
Disclosure: I am/we are long LMCA, LSXMA, LSXMK, LMCK, SIRI, BATRA, BATRK.
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.