The John Malone Complex – A Study in Financial Brilliance

The John Malone Complex – A Study in Financial Brilliance

by VW StaffMay 10, 2014, 10:26 pm

This is an excellent white paper on John Malone by Denali Investors (a great value oriented hedge fund, run by Kevin Byun). Also see Cable Cowboy: John Malone and the Rise of the Modern Cable BusinessThe Billionaire Shell Game: How Cable Baron John Malone and Assorted Corporate Titans Invented a Future Nobody Wanted, and The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success


The John Malone Complex A Study in Financial Brilliance below

¡ A Brief History
¡ Creating Liberty Media – 1991
¡ Alphabet Soup
¡ Strategy
¡ Chronology
¡ Entity Summary
¡ LINTA/LVNTA Spinoff – 2012
¡ Four-Way Spinoff – 2014
¡ Some History
¡ References

Hiding in Plain Sight

Due to only perceived complexity, most investors are unaware of one of the greatest owner/operator/allocators of this time
¡ These opportunities are hiding in plain sight, if one is simply paying attention
¡ Yet I have never seen consolidated summary or analysis across the Malone entities, so I decided to do it myself

Lowest Paid, Best Performing CEO
During the preceding 15 years, Malone had enjoyed a reputation of being one the lowest-paid, best performing CEOs in America.

For more than 15 years of running TCI, what drove Malone was a determination to create the biggest and most cash-efficient cable operator in the countryc Yet, for all this, his stake was puny: a tiny fraction of 1% in 1991.

It was making Bob [Magness] very rich. And Bob wasnft reciprocating. And that was just Bobc Thatfs what created Libertyc And it worked.h – Malone (Note: Magness was a father figure to Malone and there was no ill will)

Government Impetus
? “Based on talks with his attorneys as well as his cable colleagues, Malone suspected that government regulators would try to force him to split TCI in two – a distribution company, owning all of TCI’s cable systems, and a content company, owning interests in cable channels. So Malone decided to do it for them.”
? “In early 1991, he set up plans to form a new company, Liberty Media, and planned to stock it with more than $600 million worth of assets from TCI, roughly half the value in cable systems and the other half in programming stakes, mostly minority interests in small and large channels.”

Liberty Media returned 15x the initial
investment in two years
Shareholders received rights that entitled them to exchange some of their TCI stock for shares in the new company.
Liberty was issuing a maximum of only 2.1m shares. TCI had 415m shares…

Right received for every 200 TCI shares. Each right + 16 shares of TCI (at $16) = 1 share of Liberty Media! = $256 per share…
Liberty showed a pro forma loss.
Another twist: Any common not sold in the rights offering would be replaced by preferred stock owned by TCI, i.e. a backstop to the deal.
The Bottom Line: The fewer shareholders that participated in the Liberty offering, the more leveraged the upside potential for Libertyfs stock.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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