Trio of Factors Pressure LMI Stock

8/01/2004 8:00 PM Eastern

Liberty Media International Inc. stock hit a new low July 28, in part because of investor uncertainty concerning one of its biggest shareholders, Comcast Corp.

LMI was spun-off from Liberty Media Corp. on June 3, opening at $38.50 per share and rising slightly that day to close at $39.15. But since that time, LMI shares have fallen more than 18% ($7.17 each). On July 28, the stock fell to a new low of $31.65, before closing at $31.68.

Chasing Liberty
LMI’s share price has tumbled.
Date Price
Source: NASDAQ Web site

According to analysts that cover the stock, LMI shares are under pressure for several reasons: a $750 million rights offering that LMI initiated to help it raise money to pay down debt, which could dilute the stock; the decline of shares in UnitedGlobalCom Inc., one of LMI’s biggest holdings; and the uncertainty over what Comcast Corp. will do with its more than 6 million LMI shares.

Comcast acquired the LMI stake as part of its deal to sell its 57% interest in shopping channel QVC Inc. to Liberty last year. As part of the $7.9 billion price, Comcast received more than 200 million shares of Liberty Media stock. While Comcast sold about 100 million Liberty Media shares in a block sale shortly after acquiring the stake, it owned 120.3 million Liberty shares at the time Liberty Media spun off LMI as a dividend to shareholders. Comcast has since swapped its Liberty Media stake for $545 million in cash and Liberty’s 10% interest in E! Entertainment Network and 100% of International Channels Network).

Because LMI is not considered a strategic asset for Comcast — a company spokesman said that the MSO would probably sell its LMI stake “eventually” — investors are nervous that such a large block of LMI shares could potentially hit the open market.

Stifel, Nicolaus & Co. cable analyst Ted Henderson placed more of the blame on UGC.

The Comcast stake “is an overhang and there is some concern about that overhang,” Henderson said. “But I think that it is more that broadband sentiment in general is coming down. Their largest asset, UnitedGlobalCom, has been absolutely pummeled, and that represents 60% of [LMI’s] portfolio.”

LMI owns about 55% of UGC, the largest cable operator in Europe. In addition, LMI also own a 45% interest in Japanese MSO Jupiter Communications Inc. and 50% of Japanese programming company Jupiter Programming.

UGC shares have dropped 16.5% since June 3, comparable to LMI’s decline. The stock is down 27.4% since the beginning of the year.

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