|Shares Out. (in M):||87||P/E||NM||NM|
|Market Cap (in $M):||3,722||P/FCF||NM||NM|
|Net Debt (in $M):||1,472||EBIT||0||0|
We believe Liberty Ventures (LVNTA) is an attractive investment, trading ($3.7 billion market cap) at an unwarranted discount to its net asset value ($5.6 billion) with potential catalysts for a 50% gain in 18 months. While Ventures (like many Liberty securities) has been discussed on VIC before (March 2016 by juice835, July 2015 by clark0225 and Aug 2012 by mjw248), we think the Ventures NAV is now the “cleanest” it has ever been given the spin/split-offs of Trip Advisor, CommerceHub and Expedia and with Charter/Liberty Broadband now making up over 85% of the net asset value. (We refer readers to those earlier write-ups for additional commentary on the history of Ventures/Liberty).
We believe that Ventures is attractive for the following reasons:
1. Largest portion of NAV made up of core holdings in Charter which is itself an attractive investment with both organic growth and M&A optionality
2. Collection of valuable “other” assets in publicly traded stakes and tax assets provide value and cash flow and may be simplified over time
3. Optionality on John Malone capital allocation acumen from cash and incoming cash flow
4. Potential catalyst for combination with Charter/Liberty Broadband in a Verizon or other merger would eliminate multiple levels of discounts
5. Standalone returns in the mid to high teens
We believe that Ventures is mispriced because of its size, liquidity and complexity, though there are some other risks that we will discuss as well.
Net Asset Valuation
As longtime Liberty investors know, Ventures has been the clean-up entity for Liberty that holds the public, non-controlling interests in many companies that don’t fit in any of the largest operating media assets. It also has a hodge-podge of esoteric debt securities with advantageous tax characteristics and some other assets that are complex but valuable. We have heard of Ventures referred to as the “Liberty public hedge fund” and the “red-headed step-child” and everything in between. Like most Liberty securities, it has also generated exceptional returns for investors despite still trading a large discount to its value (28% CAGR from Aug 2012 to Nov 2016 inclusive of Trip Advisor and Commerce Hub separations, per 2016 Analyst Day).
Liberty Ventures currently consists of (in order of size):
1. Liberty Broadband (LBRDK): 42.7 million shares
2. Charter (CHTR): 5.4 million shares
3. Tree.com (TREE): 2.8 million shares
4. Interval Leisure (ILG): 16.6 million shares
5. FTD (FTD): 10.2 million shares
6. Private investments in Evite and others (valued at zero in our analysis)
7. $1.96 billion face value of Exchangeable Debt (valued at par in our analysis)
8. $487 million cash
9. Some “green” energy investments (valued at zero in our analysis)