$LBTYK: can Liberty Global finally spin to win? | Stock Spin-Off Investing's Rich Howe

Summary

Rich Howe of Stock Spin-Off Investing makes the bull case for Liberty Global ($LBTYK): cheap on a sum-of-the-parts, …

Transcript

All right, hello and welcome to yet another value podcast. You're about to listen to an episode, well, I I guess I should say with yours truly, Andrew Walker. You're about to listen to an episode with Rich Al from stock spin-off investing.com. We are going to talk about Liberty Global. The ticker there is LBT YK. As always, nothing on this podcast is investing advice. Full disclaimer show notes, end of episode, all that sort of stuff. Look, I think you're going to find it interesting. LBT Liberty Global is the company that has killed a thousand mill a hundred thousand million value investors. It is, as always, crazy interesting right now. If you believe the company, the stock is trading at $12 per share. They've got $10 per share of investments on their balance sheet. They've got $5 per share of cash on their balance sheet. And they're about to spin off a business that they're arguing is going to be worth $12 to $15 per share. And they have another business in there. So, it is crazy interesting on some of the part story, but as you're going to hear me push back on Rich and talk about and think about I've been burnt a hundred million thousand times before and I'm worried I'm going to get burnt again. And there are some troubling signs over at good old Liberty Global. And you know, John Malone, he still has the voting shares and I don't I don't know if he's really plugged in here. And you'll you'll hear a lot of other pushbacks here. So, it's a really interesting conversation. Then at the end, we're going to talk about a couple of other interesting spin-off situations. So, you know, if you're following spin-offs, I'm a subscriber. I'm a happy subscriber. Rich does great work covering every spin-off that is happening in the market that is upcoming and all that type of stuff. So, we're going to get there in one second. But first, a word from our sponsors. Today's podcast is sponsored by Alpha Sense. Look, earning earning season is coming up. It's basically already here as I'm recording this on April 20th. And earning season is tough. There are, you know, you're following dozens of companies. You're following the companies you're investing in. You're following all the companies that they that tack onto the companies you're invested in. And it takes a lot of time. You know, there's the famous story of when you're on the sell side at earning season, it is your Super Bowl. You late nights if you're on the sell side, buy side, pretty late nights as well on buy side trying to track all of these things. And AI has really just for me personally, AI has changed how I approach earning season. You know, now I say, "Hey, all the companies that are tertiary, that are secondary to the main companies that I'm covering, instead of feeling like I need to read their transcripts myself, I will go and I'll slap it in and say, 'Yeah.' And I'll say, 'Hey, summarize this.' Or, 'Hey, AI, summarize five of these companies and tell me what the trends are and all that sort of stuff." Uh and you know, AI in general is perfect for that, but AlphaSense in particular has great tools for it. I've particularly been using it for to prep for podcasts and everything, but AlphaSense has the AI playbook for earning season to show you how to make better use of your time, how you can cover more companies, how you can conserve your time, how you can look at these companies closer in details with AI. It'll show you how leading investment strategies and corporate strategy teams are using AI to stay ahead of the pack. You know, summarize transcripts instantly, monitor all their competitors, look at different metrics and everything. So, I I've just I've been blown away by both AI in general and AlphaSense in particular when it comes to summarizing, getting up to speed, moving quicker. I I feel like a kid in a candy store with how much more time I can spend on the creative side, the things that I like to do, the investing things I like to do, versus feeling like, "Hey, I need to go read 20 more transcripts today." So, uh visit the show notes or check out the link in the title to download your complimentary copy of the AI playbook for earning season. And if you like to try AlphaSense for free, request a trial at alpha-sense.com/yavp. That's alpha-sense.com/yavp. All right, hello and welcome to yet another podcast. I'm your host Andrew Walker. With me today, I'm happy to have on from stockspinoffs.com, I think for the second time, my friend Rich Al. Rich, how's it going? Hey, what's going on, Andrew? Thanks for having me, man. Really excited to talk today. Before we hop into that, quick disclaimer, remind everyone nothing on this podcast is investing advice. Uh always true, see the disclaimer in the show notes or at the end of this podcast if you want a reminder of that. Uh Rich, look, Rich runs stockspinoffs.com. I'm a subscriber, you can go listen. Uh I I I need a way to track on top of the thousand other ways I track all the spinoffs, I need a way to track it and Rich is my guy for that. Every Every time there's a spin-off, about a week before I get a nice little overview of exactly what's happened everything. Rich, the company we're going to talk about today is a serial spinner, I would say. They're They're a serial spinner. Uh they're also the bane of many value funds existence, including sometimes my own. So, I I felt a little personally traumatized when we said we're going to talk about this, but uh the company is Liberty Global. The ticker there is LBTYK or LBTYA, depending if you want to get nasty with the K shares or A shares, but I will pause there and ask you what is Liberty Global and why are they so interesting right now? Yeah, of course. And then I just wanted to correct you. So, stockspinoffinvesting.com, not stockspinoffs.com, which >> Oh, man, I just did a promo for a competitor, didn't I? >> But you know what? I think I I think stockspinoffs is a good site, too. So, I I recommend them as well. I think you get some good stuff there. So, so any any stockspinoffs.com I support. >> the correct link [laughter] in the show notes. That That is embarrassing. I think I just thought spin-offs. Okay, go ahead. Of course. Um yeah, so Liberty Global also I reached out to you and I said, you know, I'd love to talk about Liberty Global and you said sounds good, let's do it. Um so, basically the the pitch in a nutshell is that um this is a sum-of-the-parts story with a hard catalyst, where I think you're going to get the majority of the value back that the stock price is currently reflecting um within 18 months to 2 years. Um you know, as you know and many value investors know, Liberty Global has been a sum-of-the-parts story for a very long time. Um the strategy that John Malone has had is to basically consolidate and um and scale up um many of the European telecoms using, you know, cheap debt, use that to shield tax liability, generate a lot of free cash flow, and you know, hopefully that would work out well. It really has not worked out well over the past um 10 years, but what got me really excited about it is that um about 2 years ago um Liberty announced that they're going to be basically changing their strategy. They're going to be breaking up. So, the first step of that was to spin off their Swiss uh telecom business called Sunrise Communications. So, you know, I got involved that that summer. And you know, since then the spin-off has taken place. Sunrise Communications has not been you know, it hasn't been a home run but it's performed well. And you know, since the time of that initial announcement Liberty Global plus the shares of Sunrise is up about you know, 40%. So, it's not a home run by any means. But but but not bad beating the market by a little bit. Step two of the transaction or step two of this plan is that they're going to be spinning off a company called the Ziggo Group which is based in the Netherlands. They're going to be merging that joint venture with another business that they own in Belgium. And long story short, I think that that business should be worth maybe 12 to $14 a share right now as we're recording. I think Liberty's around $12 or maybe even under $12. And then the next question obviously is what is the stub worth? So, Liberty although when you you pull it up on Yahoo Finance, it looks like it has a ton of debt. All that debt is actually at the subsidiaries level. There's no debt that's recourse to Liberty Global. They do have 1.5 billion dollars of cash or about $5 per share. They also have $10 of private and public investments. But even if you haircut those private and public investments by 50% just cuz you know, we don't know what what whether those are going to be profitable investments or not, you get $10 of value between the cash and the investments. So, $10 plus $12 from Ziggo Group gets you 22 bucks. And then VMO2 is another JV which is their biggest telecom asset. That's a highly levered asset. But I think even at a minimum it's worth probably about three bucks. And so, you know, long story short is stock trades at $12 today. I think it's probably worth 25 to 30. And you're going going a hard catalyst within 18 months where you're going to receive shares in the spin-off. So, that's that's kind of the pitch in a nutshell. So, that was a great pitch. And I I I think the fun thing about Liberty Global is like it is it's impossible to talk about without bringing up the history. And I will say one of the things that worries me is even the management team, you know, they come out and I reread as we were prepping for this, I reread the Q4 call, the Q1 call, and they did a thing at New Street. They don't and this is Freeze who's the chairman who's been here for He doesn't really talk about the operating metrics a lot. He comes out and he's hammering to some of the parts. He's hammering all all this capital allocation stuff. And I do worry that, you know, when a man every time a company I love the decks where they publish, "Hey, here's our sum of the parts." And about a year ago I realized I have never invested in a company that said, "Our stock is at 10, here's the sum of the parts that should is worth 20." I've never invested a company that's published that sum of the parts deck and made money in it. Like literally never. So, I guess my first question to you before I get there. A nice way to frame would be I like to say the market's a competitive place. What are you seeing that the market is missing that makes this a risk-adjusted opportunity? I'll slightly modify it. The market is a competitive place. Management is beating you over the head with here's our value, here's our value, here's our value. We're going to spin and realize. We already spun and realized. Why is the market not believing them or what is the market missing that makes this an alpha opportunity? Yeah, so I'd say from my from my perspective why I think it's an alpha opportunity. So, I would say that you know, my specialty I'm not I'm not a a sector specialist by any means. You know the telecom sector both in the US and Europe a lot better than I do. But I think my edge, what I have a lot of experience with is just looking at companies that are announcing spin-offs and evaluating whether or not a situation is in fact going to unlock value. And I think the situation here it's clear to me that that value is going to be unlocked. And and the reason why is we'll we'll run through the math, um, but if if Ziggo Group is a publicly traded company and if they do hit uh do what they're going to say they're going to do and hit the operating metrics that they say they're going to hit and pay the dividend that they've hinted that they're going that they're going to hint hit, um, it you know, I I think it's hard to imagine a scenario where it's not trading like $10 or $12 or $14. Um, so I think um in the situations that I like in terms of spin-offs that have been announced where there's it there's clearly going to be a value value unlocking event is when there's two companies. There's not like a massive company and a tiny little company. In those situations, as you know, you're probably going to see some indiscriminate selling selling situation. But in this case, both of these companies are going to be multi-billion dollar uh companies that can be owned by, you know, really any any portfolio manager that currently owns Liberty Global. So I don't think there's going to be like a a sharp indiscriminate selling situation. And then, um, I I think they're going to pay a dividend. They they've learned that Sunrise the dividend was incredibly important to the Sunrise equity story. So they're going to pay a dividend for this Ziggo Group, um, which investors are are are going to anchor to. I've seen that time and again, um, Contour Brands, Jackson Financial, Tangle Resources. All these companies signaled, "Hey, we're paying a dividend." What does that do? That it it gives investors confidence. It also, uh, signals that management is really confident in its free cash flow ability. And it's super simplistic, but I've just seen time and again that that's a really, um, crystal clear way to unlock equity value. And then the Stub is going to have it's going to be like, "Okay, well, you have Stub Liberty now. Um, you have 3.4 billion dollar of investments. You have 1 and 1/2 billion dollars of cash. That's got to be worth something." And then you have this other, uh, Virgin Media business, which is highly levered and we can talk about that. It has a lot of structural challenges. We can talk about that. But, you know, it generates about 10 billion uh 10 billion pounds of of of revenue, you know, 4 billion pounds of of EBITDA, um, and they're going to be deleveraging that. And then the other reason why I think this is an alpha opportunity is just cuz like when I talk to people, it's like, "Oh yeah, that's interesting, but like why do I want to wait around until the end of 2027, right?" Like who wants to wait around till then for Like why can't I wait until Q1 of of next year? And maybe that's the right pushback. And maybe I should, but like I just don't have conviction in when the market's going to start paying attention, but I think eventually it will. You know, the other thing in people hear this throughout the conversation as I'm talking to you and I texted a few people who followed Liberty Global for a long time alongside me and said, "Hey, I'm doing a podcast on Liberty Global. I'm brushing up. Talk me out of You know, did it work for them? No, but maybe it'll work for me now. Like talk me off this bridge cuz it looks really darn cheap and there's some of the parts are and all of them texted back and were just like, 'I can't do it with Mike Fries again. I just cannot do it with him.'" So I think that might be another thing and we'll get there. But let me ask uh a starting question. Longtime listeners will know capital allocation. I love capital allocation, all this sort of stuff. You read The first thing if if any listener goes and reads Mike Fries's last conference call in the new street appearance, he says, "We are capital allocation animals. We are highly focused on capital allocation. You know, I think the direct quote was, 'It will surprise no one who's followed Liberty Global that we are highly focused on capital allocation right now.'" And one of the things they talk about is cutting the corporate the corporate overhead, which is awesome. But the thing that jumps out to me, you know, he's they're coming and hammering the sum of the parts are right. And he says what you said, "$10 per share of Liberty Growth and we'll talk about the value there. $5 per share of cash. You get Ziggo for free. You get VO2 for free." They're not buying back shares. And it's not just that they're not buying back shares. You know, historically Liberty Global was the share repurchaser. You know, they were hammering the share count. And then they took it down. You know, in 2025 they buy back 5% of the stock and this year they're buying back 0% of the stock. It's like, "Well, you know, if you really are convicted that you've got $15 per share of financial assets plus all your operating assets and you know the capital the capital structure is just so perfect that nothing can bleed through so it's all like really firm value. I would just ask these highly sophisticated guys, why aren't they buying back shares? Yeah, so my answer to that is they need to conserve basically what they're doing as as from my perspective is they are getting every dollar that they can to delever they need to delever Zegur Group and then they need to delever VMO2 because every dollar that they use to delever Zegur Group is going to translate directly to equity value. Let me push back there cuz again one of the nice things is and you mentioned up front if you view this on Yahoo Finance, Bloomberg, whatever because it consolidates you're going to say oh this is a really levered company. But the what they would say and what I believe and I think what most people believe is their structure in silos, right? The famous hey bad co good co and I'm not saying actually Zegur or bad phones but bad cos but those have all of the debt and it's non-recourse to the parent. And what they're saying and again I believe this $5 per share of cash at the parent, $10 per share of growth ventures at the parent. Non all the debt is non-recourse at the operating subs. So I do hear you on hey all of the all of the cash flow is going to pay down debt but I would say hey that's the sub co that is paying down the debt, right? So there's two things that happening that's happening either A with this $5 per share of cash but they're not buying back shares at the top co which I think is a mistake or B even worse not only they're not buying back shares they're taking top co cash to pay down sub co debt which is a highly inefficient and actually transferring firm value from the op co from the top co which could be used to buy back shares at this huge discount. You're just retiring so it just it strikes me as disingenuous a little bit. Yeah, I think that's fair. I think that's totally fair. I mean I think I I would love if they if they bought that I mean they have they have the billion and a half of cash. Um I would say that the biggest and then they have apparently 3.4 billion dollars of of private and public investments. You know, even if you haircut that that's substantial value and some of that is public like Lionsgate and and ITV. And so that you know, they they theoretically could sell that to to just buy back Liberty Global stock and I think that would be a great use of cash. Um I think I guess um the the way that I'm thinking about it and I think the biggest pushback that I've gotten um it is in terms of Ziggo Group is the business right now um it's kind of hard to figure out exactly how much debt they have. Um but according to management they have between you know, low fives to mid fives of of debt. And so they basically can't they couldn't spin this asset out if it has five and a half turns of debt into the public markets. Like I don't think the reception would be particularly good. So they're very focused on getting the debt from four five and a half turns down to four and a half turns. And how are they doing that? They're they're basically all the cash flow that they're generating at Ziggo Group and at Telenet, they're going to use that to basically pay down debt. They're also going to sell some of their their infrastructure assets, you know, like wire and some of the tower um and wire and some of the towers to generate um you know, the guidance that they've given is 1.2 billion uh of of uh proceeds to to pay down debt. And so the the thought process is hey, you you take debt down from 5.5 times to 4.5 times, we have a much better equity story. That's a good use of cash. Um and then you know, especially if we pay a dividend that's going to translate directly to equity value once we spin this thing out. But you're right. I mean, you're right. If if they believe if they believe that the sum of the parts and I think they do for better or worse, I think they believe the sum of the parts is a lot higher, they should be buying back stock right now. Especially when when they're kind of on the precipice of this value creation event. Yeah, I I look I I yell at you all I want about it. You can yell at me all you want about it. We're just yelling into the wind, right? So >> Yeah. Let me ask you another thing. No, so another thing, and again, I worry because Mike Fries I I will I want to talk Mike Fries's history in a second, but I really get worried when he comes on these investor calls and, you know, his script is all, here's the sum of the parts. We'll talk about the growth portfolio, but here's the sum of the parts. We've got all this cash for this great value. And the company seems much more focused on kind of the financial engineering, or at least Mike Fries does, than the business performance. You know, it's not lost on me. When I was reading the Q1 call, halfway through I stopped and I was like, okay, I know they think Zigo should be valued at uh the 11.5 times 11.5% free cash flow yield, but they have not mentioned once how Zigo is performing and anything. I worry about that. And if I broke Get back again, I'm a long-time Malone follower to my chagrin. I The worst investments I've ever made over time, if you bucketed them all together, would be the Malone comp ex. And it It's not lost on me that a lot of what they're talking about. Now, you do have the bucket of silos and everything, but a lot of what they're talking about of, hey, we should value Zigo Group at an 11.5% yield. It's how John Malone has gotten in trouble over the past 10 years. You know, I remember in 2019 him calling, hey, Discovery Communications is a free cash flow machine. Yes, but it's a dying free cash flow machine because it's tied to the cable bundle. I remember 2021 at Liberty Investor Day, he came out and said, I think the best value in my portfolio is Qurate, QVC. And I That's one of the times where everything flipped for me cuz I was like, dude, Qurate might generate a cash, but that is a structurally declining business in a lot of trouble. I don't think it's going to be here in 5 years. I don't know if it's going to be here in 5 years. And here we are 5 years later and they're filing for BK. Now, there's still a business there, but it it was one of the worst investments ever. And I I I guess what I'm trying to come to, Charter I I think is a lot the same thing. I worry that Malone and the people around him got so focused on here's the free cash flow number. I mean, look, I I can yell at you all I want about it. You can yell at me all you want I guess what I'm trying to come to, Charter I I think is a lot the same thing. I worry that Malone and the people around him got so focused on here's the free cash flow number that they forgot that especially in telecom your free cash flow number is a trailing metric and your financials kind of take time to come through right like I could show you a cable company that's at that stopped all their cap backs and you looked at a trailing number you're like OH IT'S THIS 40% FREE CASH flow churning but all the subs are just about to start churning because we're way behind. So what I'm saying is I worry they're so focused on the Zeglio group and all this sort of stuff they like kind of take their eye off the ball and we're focused on the sum of the parts number but I don't even know how the core business is doing. I don't know if they know how the core business is doing. So I threw a ton of history and background at you. Serve as my armchair psychologist here. No, I I I think this is really really good really good caller and it's funny cuz I I I um yeah I I so so basically I'm I mean this is this is really good feedback and and good good to talk about cuz I the sum of the parts I I'm a I'm a spin-off investor like that's what I look at. I look at the sum of the parts story and I know that you know sum of the parts stories are very dangerous and I've learned that they can be extremely dangerous unless you have a hard catalyst to unlock that value. So in this case we have a hard catalyst. If you were going to be a tracking stock or if it were going to be a partial spin-off like I would be a lot less excited I probably wouldn't be be excited but the point that I'm excited about is that it's going to be a 100% spin-off. So Liberty Global is going to own 90% of this business and they're going to spin off 100% of that stake and so for better or worse they're going to force the market to value this business independently. We could I could be wrong. It could could not work out. The stock could be valued a lot lower than than I think it's going to be valued but for better or worse we're going to find out right in two years in two years we're going to find out. And then in in in the meantime we have you know we have 1.5 billion of cash and 3.4 billion dollars of investments on the portfolio. So that so that um, that adds a nice level of of kind of downside protection uh for me. In terms of how the actual business is doing, so basically, and I again am not am not a cable expert, I'm not a European uh Telco expert, but from the research that I've done, basically, um Ziggo Group has been struggling. So, um they the biggest competitor in the European market in the Netherlands is KPN. KPN has been investing heavily in fiber. Um they've been overbuilding their their fiber network. This has resulted in basically them being able to attract additional uh subscribers at at lower prices, which has resulted in Ziggo Group uh basically hemorrhaging uh broadband broadband customers. So, that's a problem. So, what has Ziggo Group done about it? So, about in 2024, they brought in a new CEO in May of 2024, and they did a they took a bunch of initiatives that appear to be working. So, one, they had to adjust their pricing strategy. So, I think ARPU is still growing modestly, but they're you know, doing promotional activity to attract new subscribers, to um entice existing subscribers to to stay in a little bit longer. Um they're renegotiating existing subscriber um contracts, and this has helped them reduce churn. They've simplified the offerings that they're that they're offering to their their customers. They've invested um to improve the reliability of their of their network. They're going to be continuing to do that this year, 50 million of OpEx, 50 million of CapEx. They've also partnered with a company called Delta Wholesale, which will which basically gives Ziggo Group access to 600K of additional uh Netherlands households, which allows the Ziggo Group to say, "Anywhere you are in the Netherlands, we have a we have a plan for you." Um and that they were able to strike a deal with with Delta Wholesale uh to do that without investing any any CapEx. And so, all these plans that they've done have resulted in net broadband um uh subscribers. They're still losing subscribers, but the losses from a year ago have improved by 700 uh uh 75%. So, it's The way you're supposed to say it is the second derivative has slowed. I I I think that's the way we're supposed to say everything. >> The trend the net the net Yeah, I don't know how they say it on the on the call. They say it a lot lot better than I do. But basically, uh a year ago they were losing 30,000 subscribers per month. Every sequentially, that trend has improved. They're They only lost 8,000 subscribers in the current quarter, and they're hoping with the additional investments that they should be able to basically be um be stable to slightly growing. And so, you know, from my perspective, um I I would say that's the biggest thing that I'm that I'm worried about. Um you know, you asked me ahead of time to kind of think of risks. What is the market worried about? What am What am I more worried about than the market? I'm not worried about deleveraging. Deleveraging isn't something that I think they can do even if they have to. They have a bunch of cash and investments on their balance sheet that they can use to delever. But I guess what I'm what I'm most worried about is those trends. Like, do those do those trends continue in the right direction? And I think they need to for this to be a successful spin-off. I think the business has to at least be stable cuz that was the case with Sunrise. It wasn't growing like gang gangbusters, but it at least it was at least pretty stable. Again, I I worry I bring too much baggage to this cuz I will tell you I I remember Bern Hobart and I did a podcast on John Malone's memoirs last year, and the the CEO you leave that he speaks most highly of is Mike Fries. And it you know, I I look at this and I look at the stock price over the past 15 years, and you're like, I I just I don't understand how he can speak so highly of Fries and like look at the stock price. Now, I the other counter to that is like pick a great company that was in 2000 was around 2000. The stock price was probably flat over the next 15 years if you were lucky because starting valuations matter. But I don't think that's quite the case here. Like, I don't think this company has really covered themselves in glory. Yes, the multiple's depressed. But I I just have trouble cuz I look at the results, and then I look This is a controlled co, right? Malone controls it right now, and Freeze can buy the control from Malone once Malone dies. Now, I don't know if Freeze has the money for that, but I I kind of look at it and say, do I want to ride with Freeze with this track record? And he he gets in a room, and he is awesome, right? He He's talking about everything value investors want to hear, and this is why this has been the widow maker for value investors for 20 years. But, you know, I he he lives in Denver, I believe. Liberty Global, it is all European assets, and you Again, I I worry that he's doing too much financial engineering, and I know a lot of people said, "Hey, man, like it the they're never going to create value in a telecom, which is a politically sensitive beast, when the CEO lives in Denver, and he's got all these subs." So, uh I'll pause there. I have one more Andrew's just like armchair psychologist Rich, talk me through this, but I'll pause there if there's any points on that you wanted to talk about. No, I think that's I think that's a really good point. I think all those points are valid. I would say the reason I you know, everybody you know, we all read You Can Be a Stock Market Genius, and you know, Malone was on the it was in the in the Outsiders as as one of the the living Outsiders, and he has a tremendous incredible track record of, you know, creating shareholder value, but you're right, like over the past 10 years, it's it's it that hasn't been the case. Um I I will say that the reason I I will say personally, like a lot of I know that Greenblatt said that like when there's complexity, uh you know, the the the Marriott spin-off with with Malone, and he structured it with the rights offering. Like, the more complexity there is, that's a sign that he's trying to um create value, and that these he's trying to rig the game in his favor. But, I've I've honestly a lot of the stuff that Malone's done, I've just said, "I can't understand it. I don't Maybe it's like higher level than than I can understand, but it's it's too complicated for me. I'm not I I I don't feel comfortable investing cuz I just don't understand it. But, I would guess uh but I guess the difference here is that it's it's just pretty clear what they're doing. Like whether or not the CEO's in Denver or not, I think I think separating the assets is just a a situation that makes 100% sense, no matter who the CEO is. And then I'll I'll say another thing as it relates to sentiment. So if you look at Value Investors Club, so Liberty Global has been written up a million times, but not not >> I said, it's the widow maker, man. This is the true widow maker. But not since 2018. So I think every value investors have gotten burned and are like, I'm not you know, I I don't want to I don't want to talk about Liberty Global. And so you know, it's been a year since it's been written up on VIC. I don't know if that's a that's a good sign or not, but it could be a a sign of sentiment. I think I think they're I think you're looking at the A shares cuz there was a there was a Liberty Global write-up in August of 2020. So there it it has been a while. >> Okay. It's been a while. Okay, I was I was Yeah, yeah, yeah. Let me ask one more quick question before I I do want to talk about that growth portfolio I think that is like the big flex here. But just last question. I'm sorry to keep harping on the major, but one thing that worries me here is the board. So Freeze does own a decent bit of stock. Now I would say hey, a lot of this is owned by through stock options and like he's been the CEO for 20 years. You'd hope he owns a decent bit of stock. But when I look at this board, I I feel bad cuz I I thought in my want to put my activist hat on days being like, hey, different boards who have 84-year-old board members being like, this is their retirement project. There's no way that they're totally dialed in. I don't want to be agist, but you know, it strikes me sometimes. And when I look at this board, I see, hey, director since 2010, 70 years old, retired from her operating roles. Director since 2005, 72-year-old. Director since 2023, 69. Director since 2005, 80 years old. Director since 2005, 86-year-old. What I guess I'm trying to drive to you is like, oh, directors in 2008, 88 years old. Uh, you know, there's not a lot of stock ownership on this board, at least in my opinion. I think especially given the tenure of directors, you'd hope the you'd hope it would be a lot higher. And I worry that you've got a staggered board in a controlled company where all the directors are many of them are legends inside the industry, but they're all past 80. You know, these guys I I I worry that you're doing these financial spin-offs and especially the growth portfolio that we're which you're going to talk about where they're basically operating as kind of a either a growth uh venture growth company or a private equity company. I worry you've got this old board of legends who are all kind of chummy, you know, they this is kind of their last skin in the game not in terms of investment just in terms of board membership and stuff. And I worry that you're you're just not going to get a lot of pushback here and and you're kind of again, we've got 15 years of this company being flat and these board members have overseen it and what's the definition of insanity? The definition of insanity would probably be me being the thousandth investor to get burned 17 times on Liberty Global. So, how do you kind of think about that, Daniel? Yeah, I mean, I think it's I think it's real it's valid. I mean, it's very valid. I mean, Malone by himself, he's 85, right? Um I don't even think he's on the board anymore, is he? Yeah, yeah, maybe he's not even not even on the board. Um but um yeah, I mean, I think I think it's um I I think it's I guess it's yeah, I mean, I guess you're you're not going to have a lot of confidence that people who have been on the board uh for you know, 10, 15, 20 years and uh they've kind of presided over over value value destruction. Um so, yeah, I mean, I think that's I I think honestly that's a that's a that's a a fair fair pushback. I mean, I guess I I guess from like an independent perspective, like maybe I don't have confidence in them making the right decision and maybe I'm too focused on financial engineering because I'm a spin-off guy, but like from my perspective, it just makes sense. So, I I the strategy and I I like the strategy cuz it's different from what they've done. Like Malone has this other vehicle, his GSI Liberty vehicle. Um and like I think that one's interesting, too. Um but the pitch as I understand it is Liberty, you know, he has this Alaskan telecom asset. He's going to use these cash flows to basically buy to create his own his new Liberty Global. And I'm like, like, okay, Malone, maybe he'll make some good acquisitions, but I like I think it's easier to make money when you're when you're breaking breaking things up. Um so, I have a lot more confidence, I guess, in Malone breaking things up. And then the marketing market being forced to value things independently as opposed to relying on him to create value as an 85-year-old guy, um you know, through M&A. >> You say you say use like it's in the future, but we're talking May 5th, happy Cinco de Mayo. We're talking May 5th. Last last week, I think, Gliba came out with the the acquisition. So, they're consolidating the Alaskan cable space. So, there there has been news there and I know I I just I I just don't love the Alaskan cable space, but I know people who follow it think it's a a pretty shrewd deal. Let me ask you on So, we've alluded to it a few times. You know, the sum of the parts. And again, you can go look. It's like page five of their investor deck, right? They'll walk you through the sum of the parts. The sum of the parts are roughly, and correct the numbers if you want, $10 per share of this growth venture portfolio. No debt against it. So, you know, non-recourse. And interestingly, I believe they mentioned they're going to start charging that growth portfolio a management fee, which to me is kind of, you know, taking from one hand to pay the other since there's no outside investors, but it could pretend different interesting things going forward. So, they've got the growth portfolio. They've got $5-6 per share of cash at the holdco. So, 10 + 5 15, let's call it. Stock is under 12 right now. So, right there we're getting at a discount to those. And then you've got the OpCos. Please don't want to focus on the growth portfolio. In the growth portfolio, they have Formula E. They've got some legacy investments in Lionsgate and a few others, but I'd love to just talk How do you think about the valuation of the growth portfolio because these are private markets for the most part, right? How do you think about the valuation? How do you get comfortable there cuz if you said, "Hey, that I've certainly invested in company that said, we got a private market at $10 a share." and then they come out and say, "Actually, it was a dollar per share." Like that is kind of the swing difference in this is a huge margin of safety versus you know, it's kind of fairly valued. How have you gotten comfortable with that? What's in there? Yeah, so the way that I think about it is I just I just haircut it all by 50%. Um so like I they they had they say they have 10 10 dollars a share value and I just say, "Okay, let's just assume for my valuation purposes that's at that that's worth um $5 a share." So that's how I think about it at a high level. Um they have uh they don't call out as as far as I know, they don't tell you exactly how each of these assets is is is marked. Um >> they I think they did and tell me if I'm wrong. I'm You you you you know more than I do. They mentioned Deloitte fair values then, right? >> Yes, exactly. Yep. Yeah. Um and I don't know if Deloitte um individually valued each individual assets but I think Deloitte valued all the assets in in um created a um 3.4 billion dollar valuation for the portfolio but maybe they did. Maybe I'll look through that and then see if they've valued each individual asset. I I I'd have to imagine they did just because like it would be very strange if they just said, "Oh, it's overall worth 3.4." and they weren't A, I believe the top five investments are 65% of the value so it'd be kind of weird [laughter] if you weren't at least fair valuing the top five investments so but I I don't know. Yeah, so the way I think about it um and uh is is basically like Formula E. That's that's the Formula 1 for uh for about for electric cars. I think that generates um about 200 million dollars of of revenue at least um in 2024, I believe. I don't know if I I have the 2025 numbers. Um I I think uh uh I think Formula 1 I I'd have to double-check but I think that's valued at like uh two times to maybe three times revenue. Um and so I think like uh evaluation for Formula Formula E around, you know, 400 to 600 million seems seems kind of reasonable. Um in terms of their other, you know, big big assets that they have, they have um Atlas Edge, which is an an edge data center um platform. This was formed with Digital Bridge in in in 2021. Um that's got to be a a pretty valuable asset. I think that's one of the top five. Um let's see. I'm just checking my notes for the other the other big assets. Um Edge Connect X, that's another US um edge data center business um that Liberty Liberty has monetized some of that. Um but I think that's probably considered one of their top five assets. They have a business called Plume, which is a Wi-Fi mesh and connected home business, um which I think is is another one of their of the top five business. And then in terms of the public public assets, um Lionsgate is I think worth about a hundred million million dollars. And then I think they have like a a decent stake in ITV, which is worth about another hundred million dollars. Um but I think I think those four or five are probably the biggest uh the the biggest drivers. Um and to be honest, I don't have I don't have tremendous insight. I mean, uh I you know, the way that I think about Formula E, yeah, Formula 1 uh Formula 1 is is a massive um in a massive business. It has grown incredibly. Um yes, Formula E could be really interesting. Um right now, like I think it it lost revenue in in 2024. I think it's still generating a decent decent operating loss, which is not unexpected. Could it be massive? Yes. Do the cars sound really cool? Yes. But it's it's one of those things where I just really do have have have have very little conviction. I mean, they haven't I I haven't been able to find out like what the IRR of their private investment portfolio is. Of course, they call out, "Hey, we monetized X, Y, and Z. We got a 30 35% IRR for for this investment, that investment. You know, we've monetized 1.6 billion dollar investments over the past 5 years. So, there I think there is value there, but it's just really hard to hang your hat on anything. And so, the way that I approach it for better or worse is is let's just call it give it a 50% discount and and call it a day. Yeah, no look all all makes total sense. I I just worry like so, putting aside the valuation which I think is difficult like >> Yeah. I I do worry that you've got this company that's a tele com company and I'm not saying they don't have some specialty, but you know, allegedly Malone has said this before with Formula 1. He had both Mike Fries and Greg Maffei and I think one of the other entities me me was one of those all were looking to acquire Formula 1. And if anyone who got that I mean it would have been a grand slam, right? But I I I do worry like you've got this company where the the top guys have absolute control and don't own I mean Fries owns a lot of stock, a lot less than I'd hope he did and a lot of it's through options like he's it to to say he's never bought stock in the open market would be a lie, but to round it and say he's never bought stock in the open market would be directionally correct and he has not bought in the past 5 years. I worry they've got this big portfolio and they're turning themselves into a basically a private equity sports firm and they like to say we've got the successes, but I I worry that this is how you get hold code discounts pretty quickly, right? If I if it wasn't in Liberty Global and it was just in a random company and there were no spin-offs if I was like, "Hey, 3.4 billion inside this portfolio, they've got no skills and they're going to buy it." Like, "50% discount, 70% discount." You know, so not that it it's not fair value, but like just a hold code control discount especially guys who pay themselves this well historically. So, I'm not as much worried about the fair value, though I will note they keep saying Deloitte fair valued it and I did some looking I can't find anything that shows the Deloitte fair value or the you know, even just the top five investments here's the value here's how we got them. I can't find anything that supports that. So they just kind of throw it out there. But I I I really worry about just the what what they're doing here and kind of the end game for that. Oh, no. I I think that I think it's complete I think it's completely fair. I mean, yeah. I mean, you do not want as a sum of the parts investor like you you do not want, you know, um a lot of disparate assets. Uh basically the simple the simpler the better. Um and you're you're going to trade at a massive discount, right? Um unless you unless you spin out the assets to investors or unless you monetize them in some way. And then just like to your point um on the call you probably read it. They said, "Hey, this looks like you were at snooping around uh to buy an NBA franchise in Europe." Um and they were like, "Oh, yeah. We we look at everything that comes comes our way." And so clearly they're not like winding down that portfolio, right? Um so it's yeah, it's it's a very fair point. And could an NBA franchise in Europe be interesting? Yeah, but you know, there's going to be what is your skill in acquiring this, right? Like if you and I went and bought a I'd love to buy the New Orleans Pelicans, right? You and I we can go sign it. But what's your skill in acquiring it? Well, we were the high bidder. With an NBA franchise, I mean, maybe the NBA wants isn't looking for top dollar right up front. They want a telecom company to come in because a telecom company's kind of going to push the push the uh sports rights and stuff. I I I could potentially see how you could say that, but I don't know. In a digital world do you really need the telecom company? There's probably a lot more. I just don't know. So yeah, it's just my worry is when you've got these companies and this is the worry with Paramount buying Warner Brothers, you know, any uh these are trophy assets and if you're using kind of other people's money, it's very easy to talk yourself into it and say, "I'm a great acquirer. I I I can do this." And by the way, I buy the NBA Europe franchise, I'm going to get invited to all the NBA fun stuff and everything, you know, so that's my big worry. Look, I I just I I think it's fascinating. As I was re-brushing up on this for this again, I was texting my friends. I was like, "God, you you've got, you know, half the market cap is just cash, and then you've got kind of the full market cap at what they're saying is in the the growth investments, and then you've got all the OpCo businesses, and you got the spin-off company." And I was like, "I have a 0% position right now. Why isn't it 20%? Like, why isn't this the best thing we've ever seen?" And then all of the psychoses that I'm sure the listeners are listening to pops up. So, I'll pause there. Anything else you want to talk about Liberty Global? I do want to ask you a few just other random stuff while I've got you. Um, no. I mean, I guess I guess the only other thing that we didn't really talk about is is VM O2. So, that's arguably that's a very highly leveraged asset. So, they have like five and a half turns of debt. You know, if there is I think it seems to me that they're going to spin off this this Zigo Group by the end of next year. And then, once they do that, I think they're going to turn their attention to VM O2. There's a lot more here. I think the fundamental story is less even less encouraging than Zigo Group. I think there's there's more headwinds in that market. There's a ton of leverage, but they're doing basically the same thing that they're doing with Zigo Group, which is selling the infrastructure type assets to de-lever. And then, you can you know, once you do spin off that asset, you could sell it off. There were rumors in the press that tell that I think Telef- not not Telefonica. Maybe it was Telefonica. Whoever their JV partner is for the VM O2 was thinking about buying that business for like a very high enterprise value last year. And Liberty Global popped when that happened. Telefonica has a ton of ton of debt. So, like, I don't think the shareholders necessarily want it wanted that. But, that's another leg of the stool where I I see, you know, maybe $3 at a minimum to like kind of like $15 of value. But again, you'd have to get a lot of you'd have to sell a bunch of the infrastructure assets to to pay down debt to get that equity value. I'm just laughing cuz you know, again, for those of us with long log memories VMO2 was the merger of Virgin Media and O2 and you know, this was for if I remember correctly, Malone talked about getting the banana the banana out of the jar, I think is how how we framed it where you needed to merge Virgin and O2 to because the this is UK assets. The UK assets were too overbuilt. You needed to merge them to get the operational synergies and they finally did it and here we are 5 years later and it's a mess and we still need to get the banana out of the jar in some way. So Hey, while I've got you here, again, you are stock spin off investing.com. I'll get it right this time. Love to do stock What else have you seen in the stock spin off world that's kind of catching your eye, got you interested? Yeah, what what else? Um, so um, I'm trying to think what are what are the the high conviction ideas um, that I have right now. So um, let's think. Yeah, I'm trying to think um, So yeah, yeah, there I mean there's I'm trying to think there's there's a bunch of like really small stuff which I don't necessarily want to talk about cuz it's it's like it's like microcap stuff. Um, I like Liberty Global a lot. I like um, I like as if Ziff Davis is not really a spin-off um, situation but it's it's kind of a company that's that is um, is basically hit hit by this kind of SAS apocalypse but they're selling assets and I think that's selling at a big some of the parts discount. So that's one that I think looks interesting. Um, I think it looks interesting. It's so funny you mentioned Ziff Davis because I was refreshing them on the them this morning. So for those who don't know Ziff Davis is a you can correct me if I'm wrong. It's a hodgepodge of legacy online assets for the most part and they do have some other stuff. But they announced the big sale. They they were saying for months, hey, we're going to our assets are worth more than some of our parts, classic some of the parts are we're going to sell, we're going to realize that and no one believed them. Our few people even the market certainly didn't. And then in March they announced the sale of probably their best division, their connectivity division to Accenture for a massive, massive premium. And the the stock has popped quite a bit, but I think the two interesting things about it, and you tell me if I'm wrong. I I I was refreshing on this morning, so I I'm not quite there yet, but the two interesting things about it are A, if if you kind of adjust for the sum of the parts after the Accenture sale with the cash, and I haven't adjusted for taxes and expenses everything, but it still looks crazy cheap. Now, the remaining assets are not as good as the connectivity division, but it still looks crazy cheap. So, you you Chris, you but the other thing that is interesting to me is once a company has sold one asset, you kind of can see where it's going, especially when it's a big asset like connectivity. And I would refer to a what the old CommScope group, you know. Last year they sold a big asset, and then just a week ago the Remco sells the majority of their assets, the Ruckus Networks or whatever. And I see that time and time again. NVRI, I know is one. I don't have a position in it right now, but I know it's one that I I believe you've covered because there's a spin-off coming out. They sold their best division, and they've kind of got a rump division, but once they do a taxable spin-off of the rump division, you have to imagine that maybe they sell the rump division. So, as if Davis is I'm glad you mentioned because I've been looking at it because I think it's interesting Accenture will close in the next month or two, and what happens to Remco? I wouldn't be surprised if it's just sell, sell, sell and wrap this whole thing up. Yeah, that would the the one thing that worries me a little bit is they're still making acquisitions, and they've made like 3 billion of acquisitions over the years. And like clearly that strategy hasn't worked out if you look at the current valuation. But they do say they did say in the call the stock at this point at the time of the connectivity sale was at like 45 bucks, I think. And they said the commentary was this is great, but it's still not enough. Because to your point, I think they're still trading on a pro forma basis so like two and a half times EBITDA. And they they basically said, "Hey, if if our stock stays here, we're going to continue to sell assets." So, I'm hoping that they do that. And I was also kind of hoping that they would pay a big special dividend or or just buy back a ton of stock after that connectivity sale closed, but they really haven't told us what they're going to do with the cash. So, that's that's my one concern with Ziff Davis, but I own it. You know, full disclosure, I own I also own Liberty. But but but yeah, that's the only concern there. I think that one's I think that one's pretty interesting. Yeah, no, look again, you you kind of can see where the puck is going once they sell one, and maybe they go the other way, but I I think that what they do with the cash will probably be the real tell. And then the other interesting thing, if unless I'm misremembering, there is a a mini activist there. So, you know, if they take the wrong step, and the CEO does own quite a lot of quite a good deal of stock. So, I think you can count on generally decent alignment there. For sure. Yeah, I agree. And then what about you? Anything that you're things look interesting these days in this kind of any any anything, but especially special situations? Well, special situations are faster right now. I mean, I've been really into the this corporate dark arts thing. I think they're you're starting to see in the SAS world a lot of these companies where I was saying, "Hey, I want to see insider buying. I want to see some type of signaling." You're starting to see some type of signaling in the SAS world where insiders are getting aggressive. And you know, one I wrote up recently was RPD, which is a communications firm. Jana owns 10% and just got permission to take their ownership up to 20%. The company just did pretty stock price heavy targets there to their management team, and it has just been a absolute victim of the SAS apocalypse. They do security. I think their products probably aren't that great. The customer the customer reviews I've seen haven't been that great, but I mean, it is cheap cheap cheap. So, this is and full disclosure to everyone, I've got a tracking position there. But those are the type of things I I've kind of been interested in just like the really bombed out the really bombed out things. You know, the other one, timeshares I think are really interesting where especially VAC just gave their see it timeshares I mentioned it to you because all the timeshares are spin-offs historical spin-offs, not current spin-offs, but historical. Uh quite cheap and you're you're starting to see a lot of them grant their top brass pretty upside skewed uh stock price and EBITDA targets after literally a decade of underperformance. So, I think those are pretty interesting as well. >> What about um so I love I love your dark route series. Um you know, and you wrote about Lionsgate and Stars, which was which was really interesting. Basically signaling that it you know, it looks like Lion you know, Lion everybody's getting burned burned on on Lionsgate for many many times, but it looks like hey, maybe this is the time that that something actually goes through. Um and that that basically they had granted very um you know, significant stock price grants at significantly higher prices than where where where Lionsgate and Stars were. So, I thought that was I thought that was super interesting. The I that post was did not go unnoticed at the Lionsgate HQ. Is that right? Uh but no, I I think so, I'm not as interested in and people should go read the post. People should read everything I write five times in a row consecutively and maybe once a day for the rest of your life, obviously. But uh I'm much less interested in Stars. I mean, I just the media landscape is so tough and yes, they might be able to acquire. Yes, I mean, the nice thing about Stars versus say Versant is Stars is a standalone company. People are choosing to pay for it. Now, they might have forgotten they have a subscription, but people are actively paying for it. So, I do think they can say, "Hey, like we're not just protected by this legacy media bundle." And you've got the skew there, but I I just I just don't love that that asset. Like there's not that much of a reason to choose it. I think Lion is way more interested. I I'm I've been very tempted. You know, the only thing I would say is the history of media mergers is you pay a big premium and they're all really bad. I I as I was talking to a C from Inside Arbitrage as I told him when he was pitching Lionsgate along the spin. Amazon bought MGM for a huge price and Lionsgate said, "Look at that price." Amazon, I don't think they would do the MGM deal again if they wanted to. Paramount might is probably going to get the Warner Brothers deal over the finish line. I think it's going to be a mess. I think there's a potential BK. Netflix, look at their stock when they were going to buy Warner Brothers. Lionsgate can keep saying, "Look at the multiples for so valuable." Who's the buyer? Tell me who the buyer is. I I think Netflix may have gotten religion again after that. I don't know who the buyer is. I don't know who a buyer who would be happy after having bought this. And if you want to say Lionsgate versus uh Warner Brothers. I think if you could look at the Lionsgate portfolio, what they actually own, I think you get shocked pretty quickly at how empty it gets after you get through John Wick and kind of Hunger Games. Like if the portfolio beyond that doesn't get that you know, it doesn't have Harry Potter. It doesn't have Superman. Warner Brothers does. And once you start getting into that back portfolio, I don't know how valuable these legacy all this legacy catalog really is to be honest with you. Yeah, I like I liked your I liked your podcast with with with my buddy Accrued Interest where you guys were talking about Versant and Lionsgate. And I just appreciate the perspective on on that from like two media guys. Well, you know, here's the thing though. We were talking about Versant and I I think in the long term it's there in a lot of trouble but I think we were talking low 30s and the stock's gone to like 41 today. So the the other thing you have to remember is a price for everything, right? And I mean jeez, that thing was hated and and is hated. So no, Lionsgate is really interesting. I could see myself uh I'm always really tempted to buy. We've actually hit two of the ones I'm always really tempted to buy, Liberty and Lionsgate. And it's also like, "Hey, Andrew, you've been burned four times on Lionsgate and 10 times on Liberty Global, but you know, why not 11 and five? Yeah, maybe maybe this is the time. Yeah, Lionsgate I own Lionsgate. I like it. I I owned it kind of pre-spin and the thesis I mean I'm kind of getting to the point where I kind of want to cash out cuz my my thesis was always that they're going to have a very strong fiscal year 27 cuz I think they have like the resurrection that that's going to be hitting theaters. They have like another Hunger Game. Michael you The Michael Jackson movie did Michael was doing well. Yeah. So it's like my thesis was like hey they're going to have strong box office results which you doesn't translate to like a DCF but like it impacts the stock. And then on top of that you're going to get you know, merger speculation and then in terms of who's the buyer I mean um you know, accrued interest would agree with you that who's you know, who who who's the natural buyer but I from what I what I've seen there's so many big tech potential buyers and do they want to buy? Who knows? And then there's also like a ton of private equity players. Like you look at Blackstone or Apollo or some of the other guys that could potentially be buyers. Lionsgate seems like a decent bite size. Where would I potentially sell? I mean I think it's like you look at the targets where which you wrote about where the CEOs are are getting paid out like in in the mid-teens or in the low 20s. So like I think of the stock gets there like I don't think it's a stock you necessarily want to want to hold forever. Maybe it's kind of sell it into the sell it into the M&A rumors. Well, hopefully we get them at some point. Look, Rich this has been great. I'll include a link to Stock Market Investing in the show notes and it it's been awesome. Going to have to get you a hat if ever this appearance, but I'll include a link in the show notes. This has been awesome. We'll talk soon. Thanks so much Andrew. Appreciate it. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.