What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're talking about one of the most influential men in the stock market today, but because of his low profile, he's not well known by most investors. We're talking about the billionaire media mogul dr john malone. He founded the conglomerate liberty media, which has its tentacles touching all corners of the media industry. When you think about the media industry, you might think of nugget corporations like disney and comcast, which have strong brand recognition in market caps in the hundreds of billions of dollars.

But liberty is arguably much more powerful while his company is not well known by the public. John malone sits at the pinnacle of all moguls and pulls the strings of the global media landscape. From behind the scenes, he is perhaps the greatest financial engineer of his generation, as he created a convoluted system of tracking stocks and unequal voting rights that even wall street analysts have a difficult time understanding. This has given him disproportionate influence over the global media industry, for example, he was one of the driving forces behind the recently announced 43 billion dollar time warner discovery merger which promises to transform the streaming landscape in this video, we'll explain who john malone is and how His complicated liberty, media empire operates we'll also explain the technical aspects of liberty's tracking stock structures, which also have created some of the most insane short squeezes in recent history.

First, we'll explain what liberty media is liberty. Media was created by dr john malone in 1991 and was a spin-off of the cable tv company. Telecommunications inc malone was a financial engineer and made hundreds of deals over the years, turning liberty, media into a complicated structure, owning sticks and dozens of different businesses. Throughout the 2000s and 2010s liberty, media went through multiple transformations and, at one point, was owned by atm t in 2005.

Malone spun off liberty's non-us assets into liberty, global which trades on the nasdaq under the ticker symbol lbtya his other company liberty, media, mostly owns u.s assets, is not directly publicly traded on the stock market. Liberty, media has a unique corporate structure which allows malone to multiply the voting power of his capital many times and have disproportionate influence over his portfolio companies. This chart shows the list of assets that john malone controls. Firstly, his liberty, media company owns three separate segments.

The first segment braves group owns the atlanta braves major league baseball team, the second segment liberty, sirius xm group, owns a 76 stake in satellite radio provider siriusxm, as well as a 35 stake in events. Company live nation. The third segment was the iconic racing league formula. One which is very popular outside of the us other than liberty media.

He owns a controlling stake in liberty, global, which owns mostly european media assets. It also owns discovery, communications, tripadvisor and curate retail group, which owns qvc as well as other assets. John malone has either complete or significant voting control of all of these companies, which have a combined market capitalization upwards of 100 billion dollars. Malone has a net worth of about 8.3 billion dollars, which is certainly a lot, but nothing compared to the value of the companies.

He controls he has created a financial structure which allows him to amplify the power of his capital by close to 10 times in terms of voting control. So how exactly was he able to do this? He does this by raising capital from outside investors, but keeping the voting shares for himself, for example, until 2005 liberty, media owned discovery, the media company behind the discovery, channel animal planet and other shows in 2005. They spun discovery off as its own separate company. But importantly, the spinoff created three different share: class structures for the stock series, a b and c.

All three of them have the same economic ownership of the company and, to the extent that the company pays any dividends, they'll all receive the same payouts. While the series a and c shares currently trade for about 28 dollars, you might be surprised to see that the series b shares trade at 49 or roughly 75 premium. How can this be the case? They have the same fundamental economic value. So why would anyone pay a 75 premium for the b shares? It turns out that 93 of the series b shares are owned by one man.

John malone discovery has an unequal voting structure where their class a shares, have one vote per share. The class b shares have 10 votes per share and the class c shares have zero voting rights, while the class b shares only have about one percent economic ownership of discovery, they have 29 of the voting rights by owning 93 of the class b. Shares malone controls 27 percent of the votes, while only owning economic exposure worth one percent of the company. The companies owned by liberty media have similar structures.

For example, formula one has three share classes: a b and c. The series c shares have no voting rights by selling these shares to other investors. Malone can free up capital for other acquisitions, while maintaining near complete control of the company. Investors are happy to buy these non-voting shares because they have the same economic exposure.

They don't care too much about the lack of voting rights, because john malone has such a great track record that they're confident in his ability to steer the company in the right direction. The dual voting class structure of the shares leads to strange technical market dynamics. For example, liberty trip advisor is a malone associated company which owns a stake in online travel company tripadvisor. The series b shares have rise to 10 votes per share, while the series a shares only have one vote.

Each the b shares currently trade at a more than 600 premium over the a shares. The majority of the b shares are owned by liberty, media ceo and close malone associate greg mafay. Only a tiny portion of them are traded regularly. Many hedge funds buy the a share, then short the b shares as an arbitrage trade.

This leads to a situation where a huge percentage of the tiny free float is shorted. Of course, this is the perfect recipe for a short squeeze in april of 2020 liberty, tripadvisor class b shares increased in value by roughly tenfold. This is despite the fact that tripadvisor's business was facing serious distress related to the pandemic. The price action was so puzzling that the company released a statement saying that they had no idea.

What was behind the recent volatility chairs have stayed elevated since then, and have even experienced further short squeezes. So why does malone do this by spinning off non-voting shares? He reduces his economic exposure, which gives him less upside if the companies perform well. But you have to remember that malone is already a billionaire. He has more than enough money to buy anything he could ever want.

He is likely no longer motivated by more money. He wants to build a media empire which will shape the global media landscape for decades to come, he's 78 years old now and has spent the last 30 years laying the foundation for a legacy that will never be forgotten as a 27 voting shareholder of discovery. He was one of the key players behind the 43 billion discovery. Time warner, merger that deal hopes to create a global streaming powerhouse.

The combined entity will only have a single class of common stock, so malone will lose the outsized control that he had over discovery. But if successful, the new company will be his greatest creation yet and cement his legacy as a legendary media mogul for the generations to come. The real benefits of the of the tie-in between discovery and time warner discovery already has a massive video presence around the world. Right so the ability to promote and advertise and introduce a new product or service from time warner internationally is going to get a huge leg up by the cross-promotion capabilities that exist in this combination with discovery.

So you think there are revenue. Synergies is what it sounds. Like, oh, i think, there's enormous revenue synergies, particularly international discovery, does very well on the customer satisfaction, but it doesn't have the wonder, woman type of uh, big event, content that will get you an acquisition program. Where you can, you can add, you know hundreds of thousands or millions of of consumers in yeah one campaign.

Discovery owns dozens of channels which create mostly unscripted non-fiction content. They lack the type of blockbuster megahits to compete with the likes of disney plus and netflix. By combining with warner media's mega hit franchises, like wonder woman, he thinks that they have a real shot at become a major contender in the streaming wars, both in the us and internationally. The success of the new discovery warner business remains uncertain and we'll have to wait and see how it turns out, but whatever happens, malone will go down as one of the greatest empire builders in corporate history.

Alright guys that wraps it up for this video. What do you think about john malone and the liberty empire? Do you think the new discovery warner company can take on netflix? Let us know in the comments section below as always. Thank you so much for watching and we'll see you in the next one wall. Street millennial signing out.