$LBTYK：Liberty Global 终于能靠拆分赢一把吗？｜Stock Spin-Off Investing 的 Rich Howe

Hello and welcome to Yet Another Podcast. I'm your host, Andrew Walker. With me today, I'm happy to have on from stockspinoffinvesting.com—I think for the second time—my friend, Rich Howe. Rich, how's it going?

Hey, what's going on, Andrew? Thanks for having me, man. I'm really excited to talk today.

Before we hop into that, a quick disclaimer: Nothing on this podcast is investing advice. That's always true. See the disclaimer in the show notes or at the end of this podcast if you want a reminder of that.

Rich runs stockspinoffinvesting.com. I'm a subscriber. You can go listen. I need a way to stay on top of the 1,000 other ways I track all the spin-offs, and Rich is my guy for that. Every time there's a spin-off, about a week before, I get a nice little overview of exactly what's happened.

Rich, the company we're going to talk about today is a serial spinner, I would say. They're a serial spinner. They're also the bane of many value funds' existence, including sometimes my own. So, I felt a little personally traumatized when we said we were going to talk about this, but the company is Liberty Global. The ticker there is LBTYK or LBTYA, depending on 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?

Of course. I just wanted to correct you: stockspinoffinvesting.com, not stockspinoffs.com.

Oh, man, I just did a promo for a competitor, didn't I?

But you know what? I think stockspinoffs is a good site, too. So, I recommend them as well. I think you get some good stuff there. So, stockspinoffs.com, I support.

The correct link is in the show notes. That is embarrassing. I think I just thought “spin-offs.” Okay, go ahead.

Of course. Liberty Global—I reached out to you and said, “I'd love to talk about Liberty Global,” and you said, “Sounds good, let's do it.”

Basically, the pitch in a nutshell is that 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 within 18 months to 2 years.

As you know, and as many value investors know, Liberty Global has been a sum-of-the-parts story for a very long time. The strategy that John Malone has had is to basically consolidate and scale up many of the European telecoms using cheap debt, use that to shield tax liability, generate a lot of free cash flow, and hopefully that would work out well. It really has not worked out well over the past 10 years.

What got me really excited about it is that about 2 years ago, Liberty announced that they're going to be changing their strategy. They're going to be breaking up. The first step of that was to spin off their Swiss telecom business, called Sunrise Communications. I got involved that summer, and since then the spin-off has taken place.

Sunrise Communications has not been a home run, but it's performed well. Since the time of that initial announcement, Liberty Global plus the shares of Sunrise are up about 40%. So, it's not a home run by any means, but not bad—beating the market by a little bit.

Step 2 of the transaction, or step 2 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. Long story short, I think 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. Then the next question, obviously, is: What is the stub worth? Although when you pull it up on Yahoo Finance, it looks like it has a ton of debt, all that debt is actually at the subsidiary level. There's no debt that's recourse to Liberty Global.

They do have $1.5 billion of cash, or about $5 per share. They also have $10 per share of private and public investments. But even if you haircut those private and public investments by 50%, just because we don't know 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. Then VMO2 is another joint venture, which is their biggest telecom asset. That's a highly levered asset, but I think even at a minimum it's worth probably about $3.

Long story short, the stock trades at $12 today. I think it's probably worth $25 to $30, and you're going to have a hard catalyst within 18 months where you're going to receive shares in the spin-off.

That was a great pitch. I think the fun thing about Liberty Global is that it's impossible to talk about without bringing up the history. One of the things that worries me is even the management team. As we were prepping for this, I reread the Q4 call, the Q1 call, and they did a thing at New Street. Mike Fries, who's the chairman, has been here for years. He doesn't really talk about the operating metrics a lot. He comes out and hammers the sum of the parts. He hammers all this capital-allocation stuff.

I do worry that, when a company comes out and publishes, “Here's our sum of the parts,” every time, I love the decks where they publish, “Hey, here's our sum of the parts.” 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 be worth $20.” I've never invested in 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 it 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 from my perspective, why do I think it’s an alpha opportunity? I’d say that my specialty—I’m not a sector specialist by any means. You know the telecom sector, both in the U.S. and Europe, a lot better than I do. But I think my edge, what I have a lot of experience with, is looking at companies that are announcing spin-offs and evaluating whether or not a situation is in fact going to unlock value.

I think the situation here is clear to me: value is going to be unlocked. The reason why is that we can run through the math. If Ziggo Group is a publicly traded company, and if they do what they’re saying they’re going to do—hit the operating metrics they say they’re going to hit and pay the dividend they’ve hinted they’re going to pay—I think it’s hard to imagine a scenario where it’s not trading at $10, $12, or $14.

The situations I like, in terms of announced spin-offs where there’s clearly going to be a value-unlocking event, are when there are 2 companies. There’s not a massive company and a tiny little company. In those situations, as you know, you’re probably going to see some indiscriminate selling. But in this case, both of these companies are going to be multibillion-dollar companies that can be owned by really any portfolio manager who currently owns Liberty Global. So I don’t think there’s going to be a sharp, indiscriminate-selling situation.

I think they’re going to pay a dividend. They’ve learned that at Sunrise, the dividend was incredibly important to the Sunrise equity story. So they’re going to pay a dividend for Ziggo Group, which investors are going to anchor to. I’ve seen that time and again with Kontoor Brands, Jackson Financial, and Targa Resources. All these companies signaled, “Hey, we’re paying a dividend.” What does that do? It gives investors confidence. It also signals that management is really confident in its free-cash-flow ability. It’s super simplistic, but I’ve just seen time and again that it’s a really crystal-clear way to unlock equity value.

And then the stub is going to be like, “Okay, well, you have Stub Liberty now. You have $3.4 billion of investments. You have $1.5 billion of cash. That’s got to be worth something.” Then you have this other Virgin Media O2 business, which is highly levered, and we can talk about that. It has a lot of structural challenges, which we can talk about. But it generates about £10 billion of revenue and £4 billion of EBITDA, and they’re going to be deleveraging that.

The other reason why I think this is an alpha opportunity is that when I talk to people, it’s like, “Oh, yeah, that’s interesting, but why do I want to wait around until the end of 2027? Who wants to wait around until then? Why can’t I wait until Q1 of next year?” Maybe that’s the right pushback, and maybe I should, but I just don’t have conviction in when the market is going to start paying attention. I think eventually it will.

The other thing—and people hear this throughout the conversation as I’m talking to you—is that I texted a few people who have 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 it. Did it work for them? No, but maybe it’ll work for me now. Talk me off this bridge, because it looks really darn cheap.” They all 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 a starting question. Longtime listeners will know that I love capital allocation, all this sort of stuff. If any listener goes and reads Mike Fries’s last conference call or his New Street appearance, he says, “We are capital-allocation animals. We are highly focused on capital allocation.” 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.”

One of the things they talk about is cutting the corporate overhead, which is awesome. But the thing that jumps out to me is that they’re coming and hammering the sum of the parts, right? 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 Virgin Media O2 for free.”

They’re not buying back shares. And it’s not just that they’re not buying back shares. Historically, Liberty Global was the share repurchaser. They were hammering the share count, and then they took it down. In 2025, they bought back 5% of the stock, and this year they’re buying back 0% of the stock.

If you really are convinced that you’ve got $15 per share of financial assets plus all your operating assets, and the capital structure is just so perfect that nothing can bleed through, so it’s all 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 cash. Basically, what they’re doing, from my perspective, is getting every dollar they can to delever. They need to delever Ziggo Group, and then they need to delever Virgin Media O2, because every dollar they use to delever Ziggo Group is going to translate directly to equity value.

Let me push back there, because again, one of the nice things is—and you mentioned up front—if you view this on Yahoo Finance, Bloomberg, or whatever, because it consolidates, you’re going to say, “Oh, this is a really levered company.” But what they would say, what I believe, and what I think most people believe, is that their structure is in silos, right? The famous “bad co, good co.” I’m not saying Ziggo or Virgin Media O2 are bad companies, but the bad cos have all of the debt, and it’s nonrecourse to the parent.

What they’re saying—and again, I believe this, and I think most people believe this—is that their structure is in silos. So I do hear you on, “Hey, all of the cash flow is going to pay down debt,” but I would say, “Hey, that’s the subco that is paying down the debt,” right?

There are 2 things happening. Either A, with this $5 per share of cash, they’re not buying back shares at the topco, which I think is a mistake; or B, even worse, not only are they not buying back shares, they’re taking topco cash to pay down subco debt, which is highly inefficient and actually transfers firm value from the topco to the opco, which could be used to buy back shares at this huge discount. You’re just retiring debt, so it strikes me as a little bit disingenuous.

Yeah, I think that’s fair. I think that’s totally fair. I would love it if they bought back shares. They have $1.5 billion of cash. They also apparently have $3.4 billion of private and public investments. Even if you haircut that, that’s substantial value, and some of it is public, like Lionsgate and ITV. So theoretically, they could sell that to just buy back Liberty Global stock, and I think that would be a great use of cash.

I think the way I’m thinking about it—and I think the biggest pushback that I’ve gotten in terms of Ziggo Group—is that the business right now is kind of hard to figure out exactly how much debt they have. According to management, they have between the low 5s and mid-5s of debt. So they basically couldn’t spin this asset out with 5.5 turns of debt into the public markets. I don’t think the reception would be particularly good.

They’re very focused on getting the debt from 5.5 turns down to 4.5 turns. How are they doing that? They’re taking all the cash flow they’re generating at Ziggo Group and Telenet and using that to pay down debt. They’re also going to sell some of their infrastructure assets, like Wyre and some of the towers, to generate proceeds. The guidance they’ve given is $1.2 billion of proceeds to pay down debt.

The thought process is, “Hey, you take debt down from 5.5 times to 4.5 times, and we have a much better equity story.” That’s a good use of cash. And then, 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. If they believe—and I think they do, for better or worse—that the sum of the parts is a lot higher, they should be buying back stock right now, especially when they’re kind of on the precipice of this value-creation event.

Yeah, look, I can 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?

Yeah. Let me ask you another thing. I worry because Mike Fries—I want to talk about Mike Fries's history in a second—but I really get worried when he comes on these investor calls and 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.” The company seems much more focused on financial engineering—or at least Mike Fries does—than on business performance.

It's not lost on me that when I was reading the Q1 call, halfway through I stopped and was like, “Okay, I know they think Ziggo should be valued at an 11.5% free cash flow yield, but they have not mentioned once how Ziggo is performing.” I worry about that.

Again, I'm a longtime Malone follower, to my chagrin. The worst investments I've ever made over time, if you bucketed them all together, would be the Malone complex. 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, saying, “Hey, we should value Ziggo Group at an 11.5% yield,” is how John Malone has gotten in trouble over the past 10 years.

I remember in 2019 him saying, “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 in 2021, at Liberty's Investor Day, he came out and said, “I think the best value in my portfolio is Qurate, QVC.”

That's one of the times when everything flipped for me, because I was like, “Dude, Qurate might generate 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. Here we are 5 years later, and they're filing for bankruptcy.

There's still a business there, but it was one of the worst investments ever. I guess what I'm trying to get at is that I think Charter 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 take time to come through.

I could show you a cable company that stopped all its capex, and you looked at a trailing number and were like, “Oh, it's this 40% free cash flow yield,” but all the subscribers are just about to start churning because the company is way behind. What I'm saying is, I worry they're so focused on the Ziggo Group and all this sort of stuff that they take their eye off the ball and focus 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.

I threw a ton of history and background at you. Serve as my armchair psychologist here.

No, I think this is really good—really good color. It's funny because this is really good feedback and good to talk about. The sum of the parts—I’m a spin-off investor; that's what I look at. I look at the sum-of-the-parts story, and I know that sum-of-the-parts stories are very dangerous. I've learned that they can be extremely dangerous unless you have a hard catalyst to unlock that value.

In this case, we have a hard catalyst. If it were going to be a tracking stock or a partial spin-off, I'd be a lot less excited—I probably wouldn't be excited—but the point I'm excited about is that it's going to be a 100% spin-off. Liberty Global is going to own 90% of this business, and they're going to spin off 100% of that stake. For better or worse, they're going to force the market to value this business independently.

We could be wrong. It could not work out. The stock could be valued a lot lower than I think it's going to be valued, but for better or worse, we're going to find out. In 2 years, we're going to find out. In the meantime, we have $1.5 billion in cash and $3.4 billion of investments in the portfolio. That adds a nice level of downside protection for me.

In terms of how the actual business is doing, I'm not a cable expert or a European telco expert, but from the research that I've done, Ziggo Group has been struggling. The biggest competitor in the European market, in the Netherlands, is KPN. KPN has been investing heavily in fiber and overbuilding its fiber network. This has resulted in KPN being able to attract additional subscribers at lower prices, which has resulted in Ziggo Group basically hemorrhaging broadband customers.

So, what has Ziggo Group done about it? In May 2024, they brought in a new CEO and took a bunch of initiatives that appear to be working. First, they had to adjust their pricing strategy. I think ARPU is still growing modestly, but they're doing promotional activity to attract new subscribers and entice existing subscribers to stay a little longer. They're renegotiating existing subscriber contracts, and this has helped them reduce churn.

They've simplified their offerings. They've invested to improve the reliability of their network, and they're going to continue doing that this year: $50 million of OpEx and $50 million of CapEx. They've also partnered with a company called Delta Fiber, which basically gives Ziggo Group access to 600,000 additional households in the Netherlands. That allows Ziggo Group to say, “Anywhere you are in the Netherlands, we have a plan for you.”

They were able to strike a deal with Delta Fiber to do that without investing any CapEx. All these initiatives have resulted in improved net broadband subscriber trends. They're still losing subscribers, but the losses from a year ago have improved by 75%.

The trend—the net trend.

Yeah, I don't know how they say it on the call. They say it a lot better than I do. Basically, a year ago they were losing 30,000 subscribers per month. Sequentially, that trend has improved. They only lost 8,000 subscribers in the current quarter, and they're hoping that with the additional investments, they should be able to be stable to slightly growing.

From my perspective, that's the biggest thing I'm worried about. You asked me ahead of time to think of risks: What is the market worried about, and what am I more worried about than the market? I'm not worried about deleveraging. Deleveraging isn't something that I think they can't do if they have to. They have a bunch of cash and investments on their balance sheet that they can use to delever.

What I'm most worried about is those trends. Do those trends continue in the right direction? I think they need to for this to be a successful spin-off. I think the business has to at least be stable, because that was the case with Sunrise. It wasn't growing like gangbusters, but it was at least pretty stable.

Again, I worry that I bring too much baggage to this, because I will tell you: I remember Ben Hobart and I did a podcast on John Malone's memoirs last year, and the CEO he speaks most highly of is Mike Fries. I look at this and the stock price over the past 15 years, and I'm like, “I just don't understand how he can speak so highly of Fries and look at the stock price.”

The counter to that is, pick a great company that was around in 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. I don't think this company has really covered itself in glory.

This is a controlled company, right? Malone controls it right now, and Fries can buy control from Malone once Malone dies. I don't know if Fries has the money for that, but I kind of look at it and say, “Do I want to ride with Fries with this track record?”

He gets in a room, and he is awesome. 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. He lives in Denver, I believe. Liberty Global is all European assets, and again, I worry that he's doing too much financial engineering.

I know a lot of people have said, “Hey, man, 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 subscribers.” I'll pause there. I have one more, Andrew—it's just like armchair psychologist Rich—talk me through this, but I'll pause there if there are any points on that you wanted to talk about.

No, I think that's a really good point. I think all those points are valid. We all read You Can Be a Stock Market Genius, and Malone was in The Outsiders as one of the living Outsiders. He has a tremendous, incredible track record of creating shareholder value, but you're right: over the past 10 years, that hasn't been the case.

Personally, I know that Greenblatt said that when there's complexity—like the Marriott spin-off with Malone, where he structured it with a rights offering—the more complexity there is, the more that's a sign that he's trying to create value and rig the game in his favor. But honestly, a lot of the stuff Malone has done, I've just said, "I can't understand it. Maybe it's at a higher level than I can understand, but it's too complicated for me. I'm not—I don't feel comfortable investing because I just don't understand it."

But I guess the difference here is that it's pretty clear what they're doing. Whether or not the CEO is in Denver, I think separating the assets is a situation that makes 100% sense, no matter who the CEO is.

And then I'll say another thing as it relates to sentiment. If you look at Value Investors Club, Liberty Global has been written up a million times, but not—

I said, "It's the widow maker, man. This is the true widow maker."

But not since 2018. So I think every value investor has gotten burned and is like, "I'm not—I don't want to talk about Liberty Global." It's been a year since it's been written up on VIC. I don't know if that's a good sign or not, but it could be a sign of sentiment. I think you're looking at the A shares, because there was a Liberty Global write-up in August 2020. So it has been a while.

Okay. It's been a while. Let me ask one more quick question before I do want to talk about that growth portfolio. I think that is the big flex here. But just one last question. I'm sorry to keep harping on Malone, but one thing that worries me here is the board.

Mike Fries does own a decent bit of stock. Now, I would say a lot of this is owned through stock options, and 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 feel bad because, in wanting to put my activist hat on, I was like, "Hey, different boards who have 84-year-old board members—this is their retirement project. There's no way that they're totally dialed in." I don't want to be ageist, but it strikes me sometimes.

When I look at this board, I see: director since 2010, 70 years old, retired from her operating roles; director since 2005, 72 years old; director since 2023, 69; director since 2005, 80 years old; director since 2005, 86 years old. What I'm trying to drive at is: director since 2008, 88 years old. There's not a lot of stock ownership on this board, at least in my opinion. Especially given the tenure of the directors, 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—many of them are legends inside the industry—but they're all past 80. I worry that you're doing these financial spin-offs, and especially the growth portfolio that you're going to talk about, where they're basically operating as either a growth-venture company or a private equity company.

I worry you've got this old board of legends who are all kind of chummy. This is kind of their last skin in the game—not in terms of investment, just in terms of board membership and stuff. I worry that you're just not going to get a lot of pushback here. Again, we've got 15 years of this company being flat, and these board members have overseen it. What's the definition of insanity? The definition of insanity would probably be me being the 1,000th investor to get burned 17 times on Liberty Global. How do you think about that, Rich?

Yeah, I think it's real. It's valid. It's very valid. Malone by himself is 85, right? I don't even think he's on the board anymore, is he? Yeah, maybe he's not even on the board.

I guess you're not going to have a lot of confidence in people who have been on the board for 10, 15, 20 years and have kind of presided over value destruction. So, yeah, I think that's fair pushback.

I guess from an independent perspective, 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 from my perspective, it just makes sense. I like the strategy because it's different from what they've done.

Malone has this other vehicle, his GCI Liberty vehicle. I think that one's interesting, too. But the pitch, as I understand it, is that GCI Liberty has this Alaskan telecom asset, and he's going to use these cash flows to basically buy assets and create his own new Liberty Global. I'm like, "Okay, Malone, maybe he'll make some good acquisitions," but I think it's easier to make money when you're breaking things up.

So I have a lot more confidence, I guess, in Malone breaking things up and then the market being forced to value things independently, as opposed to relying on him to create value as an 85-year-old guy through M&A.

You say "use" like it's in the future, but we're talking May 5. Happy Cinco de Mayo. Last week, I think GCI Liberty came out with the acquisition. So they're consolidating the Alaskan cable space. There has been news there, and I know I just don't love the Alaskan cable space, but I know people who follow it think it's a pretty shrewd deal.

Let me ask you about something we've alluded to a few times: the sum of the parts. Again, you can go look—it's like page 5 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. There's no debt against it, so it's nonrecourse.

Interestingly, I believe they mentioned they're going to start charging that growth portfolio a management fee, which to me is kind of taking from one hand to pay the other, since there are no outside investors. But it could portend different, interesting things going forward.

They've got the growth portfolio. They've got $5 to $6 per share of cash at the holdco. So, $10 plus $5—$15, let's call it. The stock is under $12 right now. So right there, we're getting at a discount to those. And then you've got the OpCos.

But I do 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 about how you think about the valuation of the growth portfolio. These are private markets for the most part, right? How do you think about the valuation? How do you get comfortable there?

I've certainly invested in a company that said, "We got a private mark at $10 a share," and then they come out and say, "Actually, it was $1 per share." That is kind of the swing difference in this. It's a huge margin of safety versus it's 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 haircut it all by 50%. They say they have $10 a share of value, and I just say, "Okay, let's assume for my valuation purposes that it's worth $5 a share." That's how I think about it at a high level. They don't call out, as far as I know, exactly how each of these assets is marked.

They—I think they did. Tell me if I'm wrong. You know more than I do. They mentioned Deloitte fair values then, right?

Yes, exactly. I don't know if Deloitte individually valued each individual asset, but I think Deloitte valued all the assets and created a $3.4 billion valuation for the portfolio. Maybe they did; maybe I'll look through that and see if they've valued each individual asset.

I'd have to imagine they did, just because it would be very strange if they just said, "Oh, it's overall worth $3.4 billion." I believe the top 5 investments are 65% of the value, so it would be kind of weird if you weren't at least fair-valuing the top 5 investments. But I don't know.

So the way I think about it is basically Formula E. That's the Formula 1 for electric cars. I think that generates about $200 million of revenue, at least in 2024, I believe. I don't know if I have the 2025 numbers.

I think Formula 1—I'd have to double-check—but I think that's valued at maybe 2 to 3 times revenue. And so I think a valuation for Formula E of around $400 million to $600 million seems reasonable.

In terms of their other big assets, they have AtlasEdge, which is an edge data center platform. This was formed with DigitalBridge in 2021. That's got to be a pretty valuable asset. I think that's one of the top 5. Let's see. I'm just checking my notes for the other big assets.

EdgeConneX is another U.S. edge data center business that Liberty has monetized some of. I think that's probably considered one of their top 5 assets. They have a business called Plume, which is a Wi-Fi mesh and connected home business, which I think is another one of their top 5 businesses.

In terms of the public assets, Lionsgate is worth about $100 million. I think they also have a decent stake in ITV, which is worth about another $100 million. I think those 4 or 5 are probably the biggest drivers.

To be honest, I don't have tremendous insight. The way that I think about Formula 1 is that it's a massive business. It has grown incredibly. Formula E could be really interesting. Right now, I think it lost revenue in 2024, and I think it's still generating a decent operating loss, which is not unexpected. Could it be massive? Yes. Do the cars sound really cool? Yes. But it's one of those things where I just really do have very little conviction.

I haven't been able to find out 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% to 35% IRR for this investment, that investment. We've monetized $1.6 billion of investments over the past 5 years.” So, I think there is value there, but it's just really hard to hang your hat on anything. The way that I approach it, for better or worse, is let's just call it, give it a 50% discount, and call it a day.

Yeah, no, look, that all makes total sense. I just worry—putting aside the valuation, which I think is difficult—that you've got this company that's a telecom company. I'm not saying they don't have some specialty, but 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 maybe was one of those. All were looking to acquire Formula 1.

If anyone had gotten that, I mean, it would have been a grand slam, right? But I do worry that you've got this company where 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. 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 basically a private equity sports firm. They like to say, “We've got the successes,” but I worry that this is how you get holdco discounts pretty quickly, right? 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,” I'd say, “50% discount, 70% discount.” Not that it's not fair value, but just a holdco control discount, especially for guys who pay themselves this well historically.

I'm not as much worried about the fair value, though I will note they keep saying Deloitte fair-valued it. I did some looking, and I can't find anything that shows the Deloitte fair value or even just the top 5 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 really worry about what they're doing here and the end game for that.

Oh, no. I think it's completely fair. As a sum-of-the-parts investor, you do not want a lot of disparate assets. Basically, the simpler, the better. You're going to trade at a massive discount unless you spin out the assets to investors or monetize them in some way.

Then, just to your point, on the call—you probably read it—they said, “Hey, it looks like you were snooping around to buy an NBA franchise in Europe.” And they were like, “Oh, yeah. We look at everything that comes our way.” So clearly, they're not winding down that portfolio, right?

Could an NBA franchise in Europe be interesting? Yeah, but what's your skill in acquiring this? 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, maybe the NBA isn't looking for top dollar right up front. They want a telecom company to come in because a telecom company is going to push the sports rights and stuff. 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, my worry is when you've got these companies—and this is the worry with Paramount buying Warner Bros.—these are trophy assets, and if you're using other people's money, it's very easy to talk yourself into it and say, “I'm a great acquirer. I can do this.” And, by the way, if I buy the NBA Europe franchise, I'm going to get invited to all the NBA fun stuff and everything. So that's my big worry.

Look, I just think it's fascinating. As I was brushing up on this again, I was texting my friends. I was like, “God, you've got half the market cap that's just cash, and then you've got kind of the full market cap at what they're saying is in the growth investments, and then you've got all the OpCo businesses, and you've got the spin-off company.” And I was like, “I have a 0% position right now. Why isn't it 20%? 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 pop up. So, I'll pause there. Anything else you want to talk about with Liberty Global? I do want to ask you a few other random things while I've got you.

No. I mean, I guess the only other thing that we didn't really talk about is VMO2. That's arguably a very highly leveraged asset. They have 5.5 turns of debt. I think it seems to me that they're going to spin off this Ziggo Group by the end of next year. Once they do that, I think they're going to turn their attention to VMO2.

There's a lot more here. I think the fundamental story is even less encouraging than Ziggo Group. I think there are more headwinds in that market. There's a ton of leverage, but they're doing basically the same thing that they're doing with Ziggo Group, which is selling the infrastructure-type assets to delever. Then, once you do spin off that asset, you could sell it off.

There were rumors in the press that whoever their JV partner is for VMO2 was thinking about buying that business for a very high enterprise value last year. Liberty Global popped when that happened. Telefónica has a ton of debt, so I don't think the shareholders necessarily wanted that.

But that's another leg of the stool where I see maybe $3 at a minimum to around $15 of value. Again, you'd have to sell a bunch of the infrastructure assets to pay down debt to get that equity value.

I'm just laughing because, again, for those of us with long memories, VMO2 was the merger of Virgin Media and O2. If I remember correctly, Malone talked about getting the banana out of the jar. I think that's how he framed it. You needed to merge Virgin and O2 because these were UK assets. The UK assets were too overbuilt. You needed to merge them to get the operational synergies, and they finally did it.

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. While I've got you here, your site is Stock Spin-Off Investing.com. I'll get it right this time. What else have you seen in the stock spin-off world that's catching your eye or getting you interested?

Yeah, what else? I'm trying to think what the high-conviction ideas that I have right now are. There's a bunch of really small stuff that I don't necessarily want to talk about because it's microcap stuff.

I like Liberty Global a lot. I like Ziff Davis. It's not really a spin-off situation, but it's kind of a company that's basically been hit by this SaaS apocalypse. They're selling assets, and I think that's selling at a big sum-of-the-parts discount. So that's one that I think looks interesting.

It's so funny you mentioned Ziff Davis because I was refreshing myself on 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 were saying for months, “Hey, our assets are worth more than the sum of our parts. We’re going to sell them and realize that value,” and no one believed them—not many people, and the market certainly didn’t.

Then, in March, they announced the sale of probably their best division, their connectivity division, to Accenture for a massive, massive premium. The stock has popped quite a bit, but I think the 2 interesting things about it—and you tell me if I’m wrong; I was refreshing it this morning, so I’m not quite there yet—are, first, that if you adjust for the sum of the parts after the Accenture sale, including the cash, and I haven’t adjusted for taxes and expenses and everything, it still looks crazy cheap. The remaining assets are not as good as the connectivity division, but it still looks crazy cheap.

The other thing that is interesting to me is that once a company has sold 1 asset, you can kind of see where it’s going, especially when it’s a big asset like connectivity. I would refer to what the old CommScope group did. Last year, they sold a big asset, and then just a week ago, CommScope sold the majority of its assets, including Ruckus Networks or whatever. I see that time and time again.

NVRI, I know, is 1. I don’t have a position in it right now, but I know it’s 1 that 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. Once they do a taxable spin-off of the rump division, you have to imagine that maybe they sell the rump division.

Ziff Davis—I’m glad you mentioned it because I’ve been looking at it, and I think it’s interesting. Accenture will close in the next month or 2, and what happens to RemainCo? I wouldn’t be surprised if it’s just sell, sell, sell and wrap this whole thing up.

Yeah, the 1 thing that worries me a little bit is that they’re still making acquisitions, and they’ve made like $3 billion of acquisitions over the years. Clearly, that strategy hasn’t worked out if you look at the current valuation.

But they did say on the call—the stock at the time of the connectivity sale was at like $45, I think—and the commentary was, “This is great, but it’s still not enough.” To your point, I think they’re still trading on a pro forma basis at like 2.5 times EBITDA. They basically said, “Hey, if our stock stays here, we’re going to continue to sell assets.”

So I’m hoping that they do that. I was also kind of hoping that they would pay a big special dividend 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. That’s my 1 concern with Ziff Davis, but I own it. Full disclosure: I own it. I also own Liberty. But yeah, that’s the only concern there. I think that 1 is pretty interesting.

Yeah, no, look, again, you can kind of see where the puck is going once they sell 1 asset. Maybe they go the other way, but I think what they do with the cash will probably be the real tell. And then the other interesting thing, unless I’m misremembering, is that there’s a mini-activist there.

If they take the wrong step, the CEO does own quite a lot of stock, so I think you can count on generally decent alignment there. Rich Howe

For sure. Yeah, I agree. And then what about you? Anything that looks interesting these days in this kind of—anything, but especially special situations?

Well, special situations are fascinating right now. I’ve been really into this corporate dark arts thing. You’re starting to see, in the SaaS 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 SaaS world where insiders are getting aggressive.

One I wrote up recently was RPD, which is a communications firm. Jana owns 10% and just got permission to take its ownership up to 20%. The company just gave its management team pretty stock-price-heavy targets, and it has been an absolute victim of the SaaS apocalypse. They do security. I think their products probably aren’t that great. The customer reviews I’ve seen haven’t been that great, but it is cheap, cheap, cheap.

Full disclosure to everyone: I’ve got a tracking position there. Those are the types of things I’ve been interested in—just the really bombed-out things.

The other one—timeshares—I think they’re really interesting, especially VAC, which just gave its CEO pretty upside-skewed stock-price and EBITDA targets. I mentioned timeshares to you because all the timeshare companies are historical spin-offs, not current spin-offs, but historical ones. They’re quite cheap, and you’re starting to see a lot of them grant their top brass pretty upside-skewed stock-price and EBITDA targets after literally a decade of underperformance. So I think those are pretty interesting as well.

So, I love your corporate dark arts series. You wrote about Lionsgate and Starz, which was really interesting. Basically, it looks like Lionsgate—everybody’s been getting burned on Lionsgate for many, many years—but it looks like maybe this is the time that something actually goes through.

They had granted very significant stock-price grants at significantly higher prices than where Lionsgate and Starz were. I thought that was super interesting. The post did not go unnoticed at Lionsgate headquarters, is that right?

I think so. I’m much less interested in Starz. The media landscape is so tough, and yes, they might be able to acquire. The nice thing about Starz versus, say, Versant is that Starz is a standalone company. People are choosing to pay for it. They might have forgotten they have a subscription, but people are actively paying for it.

So I do think they can say, “Hey, we’re not just protected by this legacy media bundle.” And you’ve got the skew there, but I just don’t love that asset. There’s not that much of a reason to choose it.

I think Lionsgate is way more interesting. I’ve been very tempted. The only thing I would say is that the history of media mergers is that you pay a big premium, and they’re all really bad. 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 is probably going to get the Warner Bros. deal over the finish line. I think it’s going to be a mess. I think there’s a potential bankruptcy.

Netflix—look at their stock when they were going to buy Warner Bros. Lionsgate can keep saying, “Look at the multiples. It’s so valuable.” Who’s the buyer? Tell me who the buyer is. 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 would be who would be happy after having bought this.

And if you want to compare Lionsgate versus Warner Bros., I think if you look at the Lionsgate portfolio and what they actually own, you get shocked pretty quickly at how empty it gets after you get through John Wick and The Hunger Games. The portfolio beyond that doesn’t get you much. It doesn’t have Harry Potter. It doesn’t have Superman. Warner Bros. does.

Once you start getting into that back catalog, I don’t know how valuable all this legacy catalog really is, to be honest with you.

Yeah, I liked your podcast with my buddy Accrued Interest, where you guys were talking about Versant and Lionsgate. I appreciate the perspective on that from 2 media guys.

Well, here’s the thing, though. We were talking about Versant, and I think in the long term they’re in a lot of trouble, but I think we were talking low 30s, and the stock’s gone to like $41 today. So the other thing you have to remember is: a price for everything, right? Jeez, that thing was hated and is hated.

So no, Lionsgate is really interesting. I could see myself—I’m always really tempted to buy. We’ve actually hit 2 of the ones I’m always really tempted to buy: Liberty and Lionsgate. It’s also like, “Hey, Andrew, you’ve been burned 4 times on Lionsgate and 10 times on Liberty Global, but why not 11 and 5? Maybe this is the time.”

Yeah, I own Lionsgate. I like it. I owned it kind of pre-spin, and the thesis—I’m kind of getting to the point where I kind of want to cash out, because my thesis was always that they were going to have a very strong fiscal year 2027.

I think they have The Resurrection of the Christ that’s going to be hitting theaters. They have another Hunger Games. Michael, the Michael Jackson movie, was doing well. My thesis was, “Hey, they’re going to have strong box-office results,” which doesn’t translate to a DCF, but it impacts the stock. On top of that, you’re going to get merger speculation.

In terms of who the buyer is, Accrued Interest would agree with you: who’s the natural buyer? But from what I’ve seen, there are so many big-tech potential buyers. Do they want to buy? Who knows? And then there are also a ton of private-equity players.

You look at Blackstone, 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 think you look at the targets you wrote about, where the CEOs are getting paid out in the mid-teens or the low 20s. If the stock gets there, I don't think it's a stock you necessarily want to hold forever. Maybe you 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. It's been awesome. I'm going to have to get you a hat for every appearance, but I'll include a link in the show notes. This has been awesome. We'll talk soon.

Thanks so much, Andrew. I 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.