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Another Liberty Stock Hits the Street

6/13/2004 8:00 PM Eastern

There’s a new Liberty on the stock markets, and there might be more down the line if this one proves to be a success.

But the first trading day for Liberty Media International last week was a down day for it and Liberty Media Corp., the company from which LMI spun off.

LMI Series A shares (NASDAQ symbol LBTYA) closed last Tuesday (June 8) at $37.06, down $2.55 (3%) from the stock’s price when it last traded on an a “when-issued” basis ($38.50).

The following day (June 9), LMI closed at $35.95, down another $1.11 (3%).

As expected after the spinoff, Liberty Media (L) also declined, by $1.92 (17%), to close at $9.28 on June 8. It gained back 6 cents on June 9.

Liberty holders received 0.05 shares of LMI for each share of Liberty they held on June 1. Liberty Media no longer retains an ownership stake, but Liberty chairman John Malone is the new entity’s chairman and CEO.

The Associated Press reported that Malone, at Liberty’s annual shareholders meeting in Denver on June 9, said that if other parts of Liberty would be better off as standalone entities, he’d consider other spinoffs. But he didn’t get any more specific at the meeting or afterwards.

Analysts who cover Liberty weighed in with varying opinions on LMI, whose top three assets are stakes in European MSO UnitedGlobalCom Inc. and Japan’s Jupiter Telecommunications Co. and sole ownership of Liberty Cablevision of Puerto Rico Inc.

Ted Henderson of Stifel Nicolaus & Co. began coverage of LMI with a “market outperform” rating and lowered Liberty to “market perform.”

“Given the three ways to invest with Malone, we recommend buying the operating businesses, letting the noise settle down, and taking advantage of the uncertainty,” Henderson said in a note.

LMI’s operating assets are in Japan, Europe and Central and South America.

Another way to “invest with Malone” via operating assets is through UnitedGlobalCom (UCOMA), also based in Englewood, Colo., and 55% owned by Liberty.

UnitedGlobalCom’s stock held steady last week. On June 8 it closed down 7 cents, to $7.74, and it shed another 10 cents on June 9.

Henderson said in the note his firm’s advice was investors would fare better owning UnitedGlobalCom and await “ultimately being taken out by LMI.” He rates UnitedGlobalCom as “market outperform.”

Fulcrum Global Partners’ Richard Greenfield started LMI with a “sell” rating based on such near-term issues as possible sales by Liberty owners (who received LMI stock in the spinoff) “as it is a very different vehicle than Liberty,” and possible confusion between LMI and UCOMA as he estimates the UCOMA stake is about half of LMI’s net asset value.

He also cited a “looming rights offering of at least $500 million” by LMI, which Liberty has said would be used to repay notes and debt outstanding to Liberty.

Greenfield also said Comcast Corp.’s 4% stake in LMI “creates an overhang” in the stock.

Applying a 32% discount to LMI’s net asset value, Greenfield put a price target of $33 on the stock.

Henderson’s one-year price target for LMI is a more generous $49.

Tale of 3 Stocks How Liberty Media, Liberty Media International and UnitedGlobalCom fared:
L
6/2 $11.20
6/3 $11.09
6/4 $11.16
6/7 $11.20
6/8 $9.28
6/9 $9.34
LBTYA
6/3 $39.15
6/4 $38.50
6/7 $38.50
6/8 $37.06
6/9 $35.95
UCOMA
6/2 $7.45
6/3 $7.38
6/4 $7.33
6/7 $7.81
6/8 $7.74
6/9 $7.64

September