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Sirius XM, Charter Communications, and Warner Bros. Discovery have come under pressure. But investors shouldn’t count the media titan out.

Throughout his long career, John Malone has stayed at least one step ahead of the pack. In the 1980s, he was the “cable cowboy,” beating just about everyone in wiring America for cable TV. Then he evolved into a wheeling, dealing media mogul, assembling an array of investments under the banner of Liberty Media. He did so well that his name and Liberty’s were often mentioned alongside those of Warren Buffett and Berkshire Hathaway.

Throughout his long career, John Malone has stayed at least one step ahead of the pack. In the 1980s, he was the “cable cowboy,” beating just about everyone in wiring America for cable TV. Then he evolved into a wheeling, dealing media mogul, assembling an array of investments under the banner of Liberty Media. He did so well that his name and Liberty’s were often mentioned alongside those of Warren Buffett and Berkshire Hathaway.

Now, it seems, the world is catching up with Malone. At 83, he is facing challenges in broad swaths of his empire. Sirius XM Holdings, the satellite radio company, and Charter Communications, the country’s No. 2 cable operator behind Comcast, have been pressured as a result of sea changes in media and cable TV. Other companies associated with Malone, including Warner Bros. Discovery, have taken some real lumps. And Malone’s basic modus operandi, which often relies on debt, has lost its luster as interest rates have risen.

But don’t count Malone out. Just as Buffett, 93, has defied skeptics in his twilight years, Malone could do the same. Some of his holdings, like Formula One racing and the Atlanta Braves, are thriving. And Malone is still making deals. These deals, real and contemplated, provide the key to unlocking the value of his empire—and an opportunity for investors with the patience to navigate his complex web of stocks.

“Malone would rather do things sooner rather than later,” says Pivotal Research Group senior research analyst Jeffrey Wlodarczak, who is bullish on Charter and Sirius XM and views Liberty SiriusXM and Liberty Broadband

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, which holds a 26% stake in Charter, as good plays. “His level of patience is less than it used to be.”

Malone is known for turning Tele-Communications Inc., better known as TCI, into a cable behemoth, before selling to AT&T in 1999. From there, Malone built Liberty Media, where he developed a knack for nurturing media-related companies, seeing around corners, and knowing when to sell, as he did with DirecTV nearly a decade ago.

These days, Malone keeps a relatively low profile—he declined to speak to Barron’s —and lets Liberty Media CEO Greg Maffei do most of the talking. Malone, estimated to be worth $9.2 billion, according to Bloomberg, often spends summers in Maine—he is one of the country’s largest landowners—but “no major decision gets made without John’s approval,” Maffei said at a conference in May.

Malone’s Magic

Unlike Buffett’s Berkshire Hathaway, Malone doesn’t keep his investments in one entity. There is no single Liberty Media stock, and Malone uses supervoting shares through which he parlays modest economic stakes into outright or effective control. The typical Malone business has three classes of stock: Class A shares with one vote, Class C shares with none—they tend to have a K in their tickers—and thinly traded Class B shares, with 10 votes. Malone controls nearly 50% of the vote at Liberty Media but his economic stake, at under $2 billion, accounts for less than 10% of the financial value of the companies.

Malone also likes to create pure-play investments, even if it means slicing and dicing his empire, and he uses tracking stocks when a direct spinoff of the underlying business isn’t possible for tax and other reasons. Malone has set up trackers for companies controlled by Liberty, notably Liberty Formula One, which holds the auto racing business; Liberty SiriusXM, which owns an 83% interest in Sirius XM, the satellite radio operator; and Liberty Live, which owns a 30% stake in Live Nation Entertainment. Tracking stocks offer investors a play on a company’s financial performance without direct control. They are rare outside Malone’s world, and even he recognizes how unpopular they can be: His goal is to spin off companies as soon as practicable and end their tracking-stock status.

The Malone playbook often involves putting considerable debt on companies to maximize shareholder returns, while favoring stock buybacks over dividends. These strategies work well if asset values rise but backfire if they decline—as has been the case with Charter, which is more leveraged than Comcast. Higher interest rates can also make these strategies less effective.

TV Troubles

Some of the legacy media businesses Malone controls or has stakes in are in a tough spot. Cable providers like Charter have been pressured by slowing broadband subscriber growth and cord-cutting. Even satellite radio operator Sirius XM has felt the pinch. Malone-controlled Liberty Global, meanwhile, has struggled amid competitive conditions in European cable and telecommunications—its shares, at some $19, are down by a third over the past five years.

It has been a similar story for investors in Malone’s Liberty Latin America, which offers cable, broadband, and telecommunication services in Puerto Rico and over 20 countries in Latin America and the Caribbean. Its shares, around $10, are off more by than a third during the past five years.

Malone is also a small but influential investor in Warner Bros. Discovery. He is a director of the company and close to CEO David Zaslav. Malone helped create the media company in 2022 when Discovery, in which he held a key stake, merged with AT&T’s WarnerMedia. That deal has been a disaster due to declining cable viewership, advertising softness, and leverage—the company has $40 billion in net debt. The stock is down over 65% since the deal closed, to $8.50 a share.

Another company in Malone’s sphere of influence is Qurate Retail, owner of home-shopping networks HSN and QVC. Qurate, controlled by Maffei, has seen its stock fall 90% in recent years due to erosion in the business and the acquisition of Zulily, an online retail site, that was sold in 2023. The drop also reflects the company’s high leverage and concerns about home shopping amid declining TV viewership. Qurate’s equity market value is just over $300 million, against more than $6 billion in net debt plus preferred stock. There are signs, perhaps, of a turnaround in the business, though the stock, at a recent 72 cents, is a speculative inevstment. “If the recent trends of lower customer attrition and higher gross margins are sustainable, I expect investors will reconsider their view that Qurate’s business is a melting ice cube and instead focus on the company’s significant free cash flow generation and revalue the stock much higher,” says private investor Carney Hawks, a former partner at Brigade Capital Management.

Sirius Issues

Malone’s dealmaking could benefit investors. In December 2023, Liberty reached a deal to merge Liberty SiriusXM and Sirius XM. The merger, set to close this quarter, fulfills a long-sought goal of Malone to simplify the corporate structure and eliminate what had been a 35% discount on the tracking stock to the value of its Sirius stake.

Shares of Sirius, home to Howard Stern, have been pressured after a larger-than-expected drop in its paid satellite radio subscribers in the first quarter. It also has an aging base of auto subscribers, its most important customer base. Buffett, 93, is a big fan of the service and of the Siriusly Sinatra channel. Maffei has acknowledged in-car audio competition, and that the company needs to do a better job of attracting a younger audience. “This was originally built for 40-year old males,” he said, noting they are now 60. “We need to make sure that new 40-year old males are finding our stuff attractive.”

While Maffei said in May that results “will get better as we go through the year,” the stock’s recent rally, likely driven by a short squeeze, has it trading for about nine times projected 2024 earnings before interest, taxes, depreciation, and amortization, or Ebitda, and 12 times estimated 2024 earnings, with a 2.7% dividend yield.

The best way to play Sirius XM is through Liberty Sirius. The tracking stock trades at a 25% discount to the current value of the transaction, and that gap should narrow by the time the deal closes in early September. Liberty Sirius holders are due to get 0.83 Sirius shares for each of their shares after a 1-to-10 reverse stock split on Sirius XM. That’s now worth over $30, against the current Liberty Sirius price of under $23.

Berkshire Hathaway is the largest holder of Liberty SiriusXM, at more than 30%, or $2.5 billion, having boosted its stake by 50% this year. The investment is rumored to have been initiated by Ted Weschler, one of two Berkshire investment managers (with Todd Combs) who together run about 10% of Berkshire’s $400 billion equity portfolio, and often make investment decisions independent of Buffett.

Endgame for Liberty Broadband

Chris Marangi, a senior portfolio manager at Gamco Investors, and others see investment opportunities in the Malone empire. A similar strategy to Sirius could be applied to Charter and Liberty Broadband, which trades at a 35% discount to the value of its 26% stake in Charter, which was worth about $13 billion as of Thursday. (Liberty Broadband also owns an Alaskan cable-TV business valued at more than $2 billion and holds nearly $4 billion in debt.) The nonvoting shares traded around $55, and Barron’s estimates the asset value at about $90 a share (Charter stock was up 17% after reporting earnings on Friday).

“Everybody knows the endgame is to combine with Charter,” says Marangi. “There is no tax or other barrier to combining the two companies. The question is when.”

The nonvoting shares trade at $43, which values the company at about $2.7 billion, but Marangi values the stock in the mid to high $50s, based on a team valuation of at least $3 billion and the value of the real estate.

The best way to close the gap between where the stock trades and what the team is worth would be to sell the company, which many analysts and investors think Malone is poised to do in the next year. “The Braves are a well-run organization,” Joyce says. “They have one of the highest levels of fan engagement in baseball. It’s free to be acquired by a billionaire who wants a trophy asset.”

Tax expert Robert Willens sees no impediment from a tax standpoint to a sale, and Maffei did nothing to play down the possibility when asked about it in May. “We’re always trying to be good stewards of shareholder value, and we’ll see what gets presented or not,” he said.

Formula One doesn’t need a sale for the investment to pay off, even if a deal is always a possibility. Liberty bought the business in 2016 and has since significantly boosted profitability. Analysts think there is more to come from greater sponsorships and more lucrative TV rights. The sport’s popularity has increased particularly in the U.S., due in part to the Netflix reality show Drive to Survive. A new race in Las Vegas has also generated buzz.

“This is a rare asset, a global sport,” says Pivotal’s Wlodarczak.

While a tracking stock, Formula One doesn’t carry a tracker discount. Its shares have gained 26% this year, and its deal to buy motorcycle racing circuit MotoGP could offer another growth opportunity. The voting A shares, which trade at a discount to the nonvoting stock, fetch around $73, or almost 25 times projected 2025 free cash flow of about $3 a share.

“Free cash flow is just starting to take off,” says Wlodarczak, who says investors can buy and hold Formula One. He thinks it will ultimately be sold and that Liberty could get about $30 billion for the franchise, or more than $100 per share, up nearly 40% from Thursday’s close.