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Why Liberty Media's Tracking Stocks Jumped on Thursday

By Daniel Sparks – Apr 23, 2020 at 2:19PM

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The company is shuffling around the assets of its tracking stocks in an effort to get more focused.

What happened

Shares of Liberty SiriusXM Group (LSXMA -0.98%), Sirius XM (SIRI 0.00%), Live Nation Entertainment (LYV -1.98%), and Liberty Media Formula One Group (FWONA) all jumped sharply on Thursday, with Liberty Media Formula One jumping the most, rising nearly 17% as of 12:45 p.m. EDT. Live Nation, Liberty SiriusXM Group, and Sirius XM were up 10.1%, 2.3%, and 7.1%, respectively, as of this writing.

All of these stocks except Sirius XM are Liberty Media's tracking stocks, which allow investors to buy stakes in Liberty Media's various divisions. The Liberty SiriusXM Group tracking stock notably has a major stake in satellite radio specialist Sirius XM.

These stocks' gains come as parent company Liberty Media reattributed Live Nation's interest, assets, and liabilities among Liberty Media's other divisions, including Liberty SiriusXM Group and Formula One Group.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

In an effort to create more-focused and financially stable tracking stocks for its business divisions, Liberty Media reattributed a net asset value of $1.5 billion from Formula One Group to Liberty SiriusXM Group -- tracking shares that own a majority stake in satellite radio giant Sirius XM Radio. Pivotal to the reallocation was the move of Formula One Group's Live Nation stake to Liberty SiriusXM Group, creating a "complementary set of businesses that are established leaders in the live and audio entertainment space," Liberty Media CEO Greg Maffei said in a press release about the restructuring of the tracking stocks.

Meanwhile, $1.5 billion of net asset value was reattributed from Liberty SiriusXM Group to Formula One Group. This notably includes a net cash payment of $1.4 billion.

"The new Formula One Group now has a strengthened balance sheet that positions us to support and enhance the Formula 1 business while also being opportunistic during these challenging times," Maffei said.

Now what

Given how complex this deal is, investors should read Liberty Media's entire press release about these reattributions in order to fully understand their implications. 

The crux of the matter, however, is that Liberty SiriusXM Group is adding another music asset to its holdings and Formula One Group is getting more cash to weather the uncertain times caused by the coronavirus pandemic, which has forced cancellation or postponement of all Formula One auto races so far this year. 

However, in addition to these benefits, Maffei noted that "Both the new Formula One Group and Liberty SiriusXM Group now have currencies with which to complete acquisitions, raise capital and engage in share repurchases, among other things."

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Live Nation Entertainment. The Motley Fool recommends Sirius XM Radio. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
SIRI
$5.81 (0.00%) $0.00
Liberty Media Corporation Stock Quote
Liberty Media Corporation
FWONA
Live Nation Entertainment, Inc. Stock Quote
Live Nation Entertainment, Inc.
LYV
$73.78 (-1.98%) $-1.49
The Liberty SiriusXM Group Stock Quote
The Liberty SiriusXM Group
LSXMA
$37.49 (-0.98%) $0.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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