What Barry Diller did was pretty much sold TMCS out at a very very low premium in the LCOS deal. He pretty much maximized his own USAI's stakes in the new combined company. He wasn't throwing in his core USA cable network, couple studios into the deal, he only forks out his stake in Home Shopping network, Ticketmaster into the deal. After the deal was announced, LCOS holders critized Bob Davis, their CEO as being outsmarted by Diller. To them, LCOS was being taken under in the deal. TMCS was thrown in this deal but only commend about 44% of LCOS price. At the time, TMCS was in the high 50's, after the deal, it dropped to low 40's because of LCOS price drop and their price tie in the deal. Davis/Diller argue that the combined company had a revenue of 1.5B, using the internet valuation, the new company should worth about 45B. But the matter of the fact is that the street refuse to value Home Shopping Network, TicketMaster as internet stock, and those 2 account for more than 1B revenue. So as a result, TMCS valuation also is being dragged down. It's very clear that, without the deal, TMCS won't be tie with these non-internet entities, and thus the stock price will reflect an internet stock price, with this deal, TMCS is tied with HSN and other non-internet entities, it hurts TMCS valuation.
However, the complicated thing is that Diller has already said that TMCS, citysearch needs a national presence. So even if this LCOS deal gets voted down by LCOS holders lead by CMGI's David Wetherell, Barry Diller will still shop TMCS around to gain the "national presence" that it's looking for. Investors just don't have any confidence that Barry Diller will do anything to protect TMCS holders interest in the next deal. That's why it doesn't matter how well TMCS is actually doing, as long as Barry Diller is making deal for TMCS, there are going to be fear that TMCS will got taken under in any future deals. The main thing is that TMCS holder has no whatsoever voting power on ANY deal, only USAI board has the voting power. I believe that's why the street is valuing TMCS as such a low premium right now. |
