A little Net music: Liberty plays TUNE
NEW YORK - You can always count on this bull market for entertainment, especially at this speculative stage.
Today's proof comes from simply looking up a cast of a dozen of the hottest tickers since New Year's Eve and beginning to size up the characters that step forward.
Take TUNE, for example, the ticker for TCI Music, soon to be renamed Liberty Digital, the biggest gainer among issues now trading for more than $5 a share and commanding market values of at least $500 million. The shares were up 836% year-to-date through Friday, then gained another 2 5/8 Monday to 46 1/2, up 890% from 4 11/16 for the year.
Even more astounding, about $42 of the gain came since last Monday when the stock was trading at 8 3/8. Appropriately, TUNE is about entertainment and the prospect of more of it via the Internet. Its route to center stage is a tortured tale, amazing in itself. The shares took off after Liberty Media, a publicly traded subsidiary of AT&T controlled by cable TV legend John Malone, said it would roll its new world digital assets into TUNE in exchange for stock. Liberty Media can do that with ease because it already owned shares, series A, B and preferred, equaling 86% of the company. Liberty will own 94% of the shares when the transaction closes in two months.
With this asset shift, the market's implied value of Liberty Media's stake in TUNE shot up from roughly $620 million last Monday to $8.9 billion Tuesday morning.
Among those applauding is fund manager Mario Gabelli, a media maven who appreciates a good financial trick. "That was wonderful financial alchemy," Gabelli told Liberty Media CEO Robert "Dob" Bennett during an investor conference call.
Liberty is getting 128.8 million shares of TUNE for the holdings going into the company. At pre-deal prices, the shares would have been valued at $1 billion.
The magic that turns $1 billion into $8 billion is the siren song of the Internet, of course. Holdings Liberty is putting into the new Liberty Digital include: 2.5 million shares of Priceline.com (PCLN), 753,864 shares of iVillage (IVIL), 2.5 million shares and 2.5 million warrants of ACTV (IATV), and 533,334 shares of Sportsline USA (SPLN). Add to that Liberty's bandwidth rights with AT&T to provide interactive video and assorted interests in other interactive investments, including Drugstore.com, iBeam Broadcasting and Interactive Pictures. (Note, too, that TUNE shares not held by Liberty are scarce.)
TUNE's holdings mean Liberty Media will have the currency of the moment, shares in an Internet stock, the only kind of currency a prudent executive would use to buy another Internet business. You wouldn't dare use cash, General Electric CEO Jack Welch said recently. You have to have what Welch called "wampum," shares to exchange.
Indeed, that's what Bennett and Lee Masters, the new president of Liberty Digital, had in mind. "The whole reason for doing this was having a currency to expand the assets of the company," Masters says.
Masters contends TUNE stock has soared partly because of the reputations of Malone and Liberty Media. It is not all Internet frenzy, Masters says. Well, maybe.
The supporting cast of hot stocks year-to-date includes other tickers putting on Internet entertainment. CMGI, like Liberty Digital, owns interests in a slew of Internet outfits, allowing investors to imagine owning them all.
RealNetworks, up 478% through Friday, 588% through Monday, makes software to play video and audio over the Internet. InterVu, up 351% through Friday and 457% through Monday, finds short routes to stream media without jerks and gaps. Streaming media, says analyst Bill Relyea of brokerage Josephthal, began to attract investors last fall when the Internet showed John Glenn returning to space.
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