Liberty Media To Split-Off Liberty SiriusXM In 3Q24

On December 12, 2023, Liberty Media Corporation (NASDAQ NDAQ : LSXMA, LSXMB, LSXMK) and Sirius XM Holdings Inc. SIRI (NASDAQ: SIRI), the leading audio entertainment company in North America, announced that they have entered into definitive agreements whereby Liberty Media’s Liberty SiriusXM tracking stock group (NASDAQ: LSXMA, LSXMB and LSXMK, or collectively “LSXM”), will be combined with SiriusXM to create a new public company, which will continue to operate under the SiriusXM name and brand. New SiriusXM will have a single outstanding series of common stock and is expected to continue to be traded on the Nasdaq Global Select Market under the ticker symbol “SIRI.” We did an announcement report on September 28, 2023, about the Company’s plans to split-off Liberty SiriusXM and a Spin-Off Update on the same on 1/17 for further details provided on the same by the company.

Recent Company Updates

Berkshire Hathaway BRK.B Raises Its Stake In LSXM

According to Form 4 filing of 1/17 (Wednesday) with the Securities and Exchange Commission, Berkshire Hathaway purchased 2.8 million shares of the Liberty SiriusXM (LSXM) tracking stock recently for about $85 million. This follows the purchase of 2.8 million LSXM tracking stock earlier in January. The most recent purchases came on 1/9, 1/10 and 1/12 (Friday) at a price of about $30 per share. Berkshire now holds about 69 million shares of the tracking stock, valued at $2.1 billion based on CMP of $30.59 on 1/17. Berkshire purchased both the voting and nonvoting tracking stock. It bought 1.2 million shares of Liberty SiriusXM Holdings class A voting stock (LSXMA) and now holds 22.5 million shares. It also purchased 1.6 million shares of the Liberty Sirius XM Holdings nonvoting class C stock (LSXMK) and now owns 46.5 million shares.

Liberty Media Corporation Completes Acquisition of Quint

On January 3, 2024, Liberty Media Corporation announced that it had completed the acquisition of QuintEvents, LLC, an industry-leading provider of premium experiences at the world’s most prominent sports and entertainment events. Quint is attributed to Liberty Media’s Formula One Group tracking stock. The transaction valued Quint at $313 million and was funded with Formula One Group cash. Formula 1 and Quint will continue to be operated as separate companies. Quint is the industryleading provider of Official Ticket and Hospitality packages to many of the world’s most prominent sports and entertainment events. Based in Charlotte, North Carolina, with offices in six countries, Quint’s innovative programs enable those properties to expand fan experiences and corporate client entertainment opportunities in a way that reflects the quality and prestige of those brands.

4Q and FY23 Results Announcement

On 1/19, Liberty Media Corporation announced that before the opening of market trading on Wednesday, February 28th, Liberty Media will issue a press release reporting its 4Q & FY23 results and will host a conference call to discuss results at 10:00 a.m. E.T

Quarterly Interest Payment and Excess Regular Additional Distribution on 2.75% Exchangeable Senior Debentures Due 2049

On December 1, 2023, the company announced a quarterly interest payment and an Excess Regular Additional Distribution to the holders as of November 15, 2023, of its 2.75% Exchangeable Senior Debentures due 2049. The quarterly interest payment is $6.8750 per $1,000 original principal amount of Debentures. The Excess Regular Additional Distribution amount of the quarterly interest payment is $6.8750 per $1,000 original principal amount of Debentures. The excess regular additional distribution amount is $1.2635 per $1,000 original principal amount of Debentures. As of December 1, 2023, the aggregate adjusted principal amount outstanding is approximately $586 million after giving effect to the quarterly interest payment on 12/1.

Earlier, on August 3, 2023, following the split-off of Atlanta Braves on July 18, 2023, Liberty Media did an internal reclassification of its existing tracking stocks and formed a new tracking stock of Liberty Live Group (LLYVA, LLYVB VB , and LLYVK, respectively) on August 3. The formation of Liberty Live tracking stock resulted in a transfer of Liberty SiriusXM’s Live Nation Entertainment LYV , Inc. (“Live Nation”) (NYSE: LYV) stake consisting of 69.6 million shares of common stock and $920 million principal amount (as of March 31, 2023) of 0.50% Live Nation exchangeable debentures due 2050, to Liberty Live Group. Following the reclassification, the intergroup interests in the Braves Group attributed to the Liberty SiriusXM Group and the Formula One Group were settled and extinguished. In addition, the Company announced the distribution of approximately 6.8 million shares of Atlanta Braves Holdings Series C common stock used to settle the Braves Group intergroup interest attributed to the Formula One Group to holders of Liberty Formula One common stock in connection with the Split-Off. The approximate 1.1 million share intergroup interest in the Formula One Group attributed to Liberty SiriusXM Group was settled and extinguished through the attribution of cash before the record date for the Formula One Distribution. Liberty Media completed the reclassification on August 3, 2023, and each outstanding share of Liberty SiriusXM common stock was reclassified into one share of the corresponding series of new Liberty SiriusXM common stock and 0.2500 of a share of the corresponding series of Liberty Live common stock.

Valuation and Recommendation

While valuing Liberty Sirius, we use SIRI’s share price ($5.44) and exchange ratio (8.4x), without applying the tracking stock discount. Pro forma for the transaction, and assuming the debt and financing-related adjustments, on June 30, 2024, there will be approximately 3,392 million basic shares outstanding of New SiriusXM, of which former LSXM stockholders will own approximately 81% of New SiriusXM, with the SiriusXM minority stockholders owning the remaining 19%. Looking at the valuation, if the Net Liabilities Share Adjustment and the adjusted fully diluted shares of LSXM were calculated as of June 30, 2024, the Exchange Ratio is estimated to be approximately 8.4 shares in New SiriusXM for each share of LSXM held. We assume SIRI’s Current Market Price ($5.44) in our valuation. We also subtract net debt of about $1.1 billion that new SiriusXM will absorb from Liberty Sirius.

We arrive at a target price of $43.00 per LSXM share, implying a 38.8% upside from the current price of $30.93.

We also provide a sensitivity analysis of LSXM’s target price with SiriusXM’s share price.

Company Description

Liberty Media Corporation (Parent)

Liberty Media Corporation operates and owns interests in a broad range of media, communications and entertainment businesses. Those businesses are attributed to three tracking stock groups: the Liberty SiriusXM Group, the Formula One Group and the Liberty Live Group. The businesses and assets attributed to the Liberty SiriusXM Group (NASDAQ: LSXMA, LSXMB, LSXMK) include Liberty’s interest in SiriusXM. The businesses and assets attributed to the Formula One Group (NASDAQ: FWONA, FWONK) include Liberty’s subsidiary Formula 1 and other minority investments. The businesses and assets attributed to the Liberty Live Group (NASDAQ: LLYVA, LLYVK) include Liberty’s interest in Live Nation and other minority investments. For FY22, Liberty Media’s consolidated revenue was $12.2 billion.

Liberty SiriusXM (Split-Off)

The businesses and assets attributed to the Liberty SiriusXM Group (NASDAQ: LSXMA, LSXMB, LSXMK) include Liberty’s interest in SiriusXM. Liberty Media Corporation holds an ~84% controlling stake in SiriusXM Holdings (SIRI). SiriusXM Holdings operates two complementary audio entertainment businesses, SiriusXM and Pandora and Off-platform. SiriusXM Holdings continues to expand the range of choices for its listeners regarding compelling content and the array of ways it can be consumed. There are approximately 152 million vehicles in operation with SiriusXM radios. The proliferation of smart speakers and other connected devices has increased consumers’ options for engaging with and consuming SiriusXM Holdings’ content. SiriusXM Holdings also focuses on rapidly growing content categories, such as its continued interest in podcasting. For FY22, Liberty SiriusXM reported revenues of $8.7 billion.