Citi Waiting On The Sidelines In Liberty Media, Liberty SiriusXM

On April 18, 2016, Liberty Media split into three new tracking stocks. SiriusXM Group LSXMA now controls Sirius, with a 64 percent stake, Braves Group BATRA controls the Atlanta Braves and Media Group, while Liberty Media Corp LMCA has a stake in Live Nation and other assets.

“We believe the primary motivation for the split was to narrow the discount tethered to the Sirius stake to facilitate a recombination of newly formed Sirius Group (LSXMA) with publicly listed Sirius,” Citi’s Jason B Bazinet said in a report.

Liberty Media

Analyst Jason Bazinet initiated coverage of the company with a Neutral rating, and a price target of $21. He mentioned that Liberty Media was trading at a 25 percent discount to NAV, while adding, “That’s fairly large, but it isn’t unusual.”

There seemed to be limited upside to the current equity value. Bazinet further commented, “While we have Buy ratings on Live Nation and Time Warner, we believe the implied tracker and complexity discounts for LMCA merit a Neutral rating.”

SiriusXM

The analyst initiated coverage of the company with a Neutral rating, and a price target of $35. He mentioned that SiriusXM was trading at a 10 percent discount to NAV, while adding, “As such, there is little incentive for Liberty to use this discounted currency to acquire the 36% of SIRI it does not own.”

Sirius’ board would probably not accept an offer that is at a 10 percent discount to current levels. Thus, until the discount narrowed, a recombination was unlikely, Bazinet mentioned. He enumerated two paths to narrow the discount
Liberty could sell shares into the Sirius buyback, and this cash could be used to acquire SiriusXM’s shares at a discount.
“Mr. Market may narrow the discount for Liberty,” the analyst wrote.