John Malone
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A recent spike in the Discovery Communications’ class B shares was driven in part by the thin float in the stock that stems from the distinctive way that media mogul John Malone exercises influence at a range of companies including his flagship Liberty Media.
Malone, who turned 80 earlier this year, controls, or has considerable sway, at Discovery (ticker: DISCK, DISCA, DISCB) Liberty Media, Liberty Broadband (LBRDA, LBRDB, LBRDK), Qurate Retail (QRTEA, QRTEB), Liberty Global (LBTYA, LBTYB, LBTYK) and Liberty Latin America (LILA, LILAB, LILAK) through supervoting class B shares that carry 10 votes against one vote for class A stock and none for nonvoting C shares that have a K at the end of their tickers.
The class B shares represent a small amount of the shares outstanding, and they tend to be lightly traded and illiquid since Malone often holds over 90% of the B shares. He has rarely, if ever, sold any in the open market even when prices surge to big premiums to lower-vote stock. A Liberty spokesman declined to comment.
The illiquid markets for the B stock are ripe for dislocations, and in the case of the Discovery B shares, got the attention of the WallStreetBets message board on Reddit.
The Discovery B shares rose from a low of $50 on March 30 to a high of $150 on March 31 and now trade around $84, a big premium to the liquid nonvoting C shares which fetch around $33. Malone held 93.6% of the 6.5 million class B shares outstanding, leaving a public float of little more than 300,000 shares, according to the latest proxy.
With the flurry of activity in B shares, volume has recently averaged more than 30,000 shares daily, up from about 2,000 shares in 2020.
The more accurate value for Discovery is likely based on its C shares, although the big premium on the B shares could persist for some time.
One cautionary note about holding the pricey Discovery B shares is that when Liberty Expedia Holdings was sold to Expedia Group (EXPE) in 2019, there was no premium paid for the supervoting B shares largely held by Malone. Discovery has been mentioned as a potential takeover target in the consolidating media business.
The B Team
Here are the companies that John Malone controls through supervoting class B shares.
Source: Company reports
Many media companies have dual-class stocks, including Barron’s parent News Corp (NWSA), but nobody has used it as extensively as Malone. He leverages modest economic stakes of generally under 10% in companies to significant voting interests. Most investors are happy with the arrangement since Malone has an excellent track record and is viewed as friendly to shareholders.
Discovery is notable because of the huge premium on the class B shares. Most other of the thinly traded B shares trade fairly close to liquid nonvoting shares.
Individual investors who want exposure to the Liberty companies could consider the B shares if they trade for little or no premium given the possibility of a Discovery-type spike, but it can be difficult to buy much B stock, given often low trading volume.
At Liberty Broadband, the B shares traded recently for $147, a discount to the C shares at $150. But the B shares are very illiquid, with an average daily volume of about 100 shares daily.
With Discovery, Malone holds about 4% of the total shares outstanding including B stock and had 27.9% of the vote as of last year’s proxy statement. At Liberty Broadband, he owns about 2.4 million of the class B shares, or 96.4% of that class and has a 48.8% total voting interest.
Liberty Tripadvisor Holding’s class B shares (LTRPB) trade at a big premium to the A shares (LTRPA), with the B shares recently at $38 against $6 for the A shares.
The class B shares of Liberty Tripadvisor are more than 97% owned by its CEO Greg Maffei, who is also CEO of Liberty Media and has worked closely with Malone for over a decade. Liberty Tripadvisor is the only one of the Liberty companies in which Maffei, and not Malone, holds the supervoting stock.
Liberty Media has three tracking stocks: Liberty SiriusXM (LSXMA, LSXMB, LSXMK), Formula One Group (FWONA, FWONB, FWONK) and Braves Group (BATRA, BATRB, BATRK). Malone, Liberty’s chairman, holds about 96% of each of the class B stocks and a roughly 48% voting interest in Liberty Media. The B shares of the three trackers trade lightly, in line with the price of the more liquid C shares.
Write to Andrew Bary at [email protected]
