Malone’s Trading Record Bodes Well For Liberty Latin America – Liberty Global, Inc. (NASDAQ:LILA)

Malone has a track record of well-timed insider purchases

John Malone purchased $20 million of Liberty Global Latin America (NASDAQ:LILAK) (LILA) stock at a price range between $21 and $25 (See LILA’s sec form 4 filing for details). After searching through all of his insider form 4 filings over the last 6 years, I found that his purchases are large, rare and well-timed.

Let’s take a look at his previous purchases:

  • Ascent Capital (NASDAQ:ASCMA)

Malone was a 10% owner of Ascent Capital. Between Oct.1 2012 and Nov.20 2012, he purchased ASCMA shares worth over $7 million at between $54 and $60 per share. On Oct. 25, 2013, he sold the shares for $93, netting over 50% within a year.

On June 19, 2013, Malone Bought 15,458 shares of LMCA at a price of $129.37 for $2 million. Subsequently, Liberty Media went through quite a few corporate actions including a stock dividend, Charter stake spin-off, and a three-way split into Liberty Sirius, Liberty Brave, and Liberty Formula One. Based on my calculation that factoring in all these changes (see details in Appendix), Malone’s purchase has generated roughly 76% profit since purchase, outpacing S&P 500’s return of 26% during the same period.

The aforementioned trades are his only purchases in the last 6 years before the LILA purchase. This latest $20-million purchase is Malone’s biggest insider purchase by far. So why does Malone feel so confident about this business?

Spin-off is the biggest near-term catalyst

Since a fair amount of good analysis has already been published on Seeking Alpha, I will not repeat in details many catalysts that might propel the stock higher. Among the points other authors have mentioned, I feel the biggest catalyst going forward is the incoming “hard” spin-off estimated to happen around the end of this year. The spin-off will separate LILA from Liberty Global’s European operations (NASDAQ:LBTYA). LILA stock will change from a tracking stock to a “normal” stock that presents the actual ownership of Liberty’s Latin America operations. The spin-off should theoretically eliminate the discount of owning a tracking stock. Additionally, it will eliminate the risk of cross guaranteeing the debt of Liberty’s European operations with Liberty’s Latin subsidiaries. LILA management has clearly stated that after the separation, management will pursue both organic and inorganic growth (M&A) opportunities. Both revenue and margin could increase rapidly as LILA expands.

Current stock price offers great opportunity to own a nascent platform company

The net debt of $6B and year 2017 EBITDA of $1.5B listed on the company’s quarterly presentation represent the consolidated figures that include minority interests. Early Retiree’s earlier articles have some fantastic in-depth discussions about the true valuation of LILA (see here and here). The company, excluding minority interests held in its Puerto Rico and CWC businesses, has an enterprise value of about $9 billion. EV…

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