$LBTYK: can Liberty Global finally spin to win? | Stock Spin-Off Investing's Rich Howe

Summary

• Rich Howe’s pitch on Liberty Global (LBTYK/LBTYA, ~$12) is a sum-of-the-parts with a hard catalyst: $5/share of parent cash, $10/share of growth-portfolio investments (worth $5 even at a 50% haircut), a Ziggo Group spin he values at $12–14/share, and a VMO2 stub worth “$3 at a minimum” — “stock trades at $12 today, I think it’s probably worth 25 to 30.” The catalyst is a planned spin of 100% of Liberty’s 90% Ziggo stake within roughly 18 months to two years that will “force the market to value this business independently.”
• Andrew Walker’s central objection: management preaches value but won’t buy its own stock. Fries calls the team “capital allocation animals,” yet buybacks went from 5% of shares in 2025 to 0% this year. Walker argues that if parent cash is used to delever subsidiary debt, that is “highly inefficient” — “it strikes me as disingenuous a little bit.” Howe concedes: “if they believe the sum of the parts is a lot higher, they should be buying back stock right now.”
• Howe’s answer on why cash goes to deleveraging: Ziggo carries debt in the low-to-mid-5x range, and “they couldn’t spin this asset out” with 5.5 turns, so Ziggo/Telenet cash flow plus about $1.2B of guided infrastructure-sale proceeds targets 4.5x. A signaled dividend is the value-unlock mechanism he’s seen work “time and again” (Kontoor Brands, Jackson Financial, Targa Resources) — the lesson learned from Sunrise, where Liberty plus Sunrise is up about 40% since the announcement.
• Ziggo’s operations, not leverage, are Howe’s stated biggest risk: KPN’s fiber overbuild had Ziggo “hemorrhaging broadband customers,” but a new CEO appointed in May 2024 has improved the reported loss trend from 30,000 subscribers per month a year ago to 8,000 in the current quarter — a 75% improvement. “I think the business has to at least be stable” for the spin to work, as Sunrise was.
• Walker’s baggage is the point, not a footnote: Liberty Global is “the widow maker” that his contacts refuse to touch — “I can’t do it with Mike Fries again.” He catalogs the pattern — Malone calling Qurate “the best value in my portfolio” in 2021 before its bankruptcy filing, and Discovery’s dying “free cash flow machine” — and a staggered, controlled board of directors aged 69–88 with thin ownership overseeing 15 flat years.
• The $3.4B growth portfolio (Formula E, AtlasEdge, EdgeConneX, Plume, Lionsgate/ITV stakes) is where Walker sees holdco-discount risk: he believes management said it may start charging the portfolio a management fee, and a call addressed whether Liberty was looking at an NBA franchise in Europe; management responded that it looks at everything that comes its way. Walker can’t find the Deloitte fair-value support anywhere. Howe’s approach is to “just haircut it all by 50% and call it a day.”
• VMO2: Howe expects Ziggo to spin by the end of next year and then sees attention turning to VMO2 — 5.5x levered, with a less encouraging fundamental story, but potentially “$3 at a minimum to around $15 of value.” Its JV partner was rumored to be considering buying the business at a high enterprise value last year; the discussion also notes Telefónica’s heavy debt burden. Walker recalls the Virgin Media–O2 merger as Malone’s effort to get the “banana out of the jar”; five years later, “it’s a mess and we still need to get the banana out of the jar in some way.”
• Beyond Liberty: Howe owns Ziff Davis (around 2.5x pro forma EBITDA after the connectivity sale to Accenture; management said, “if our stock stays here, we’re going to continue to sell assets”) and Lionsgate, whose FY27 slate includes The Resurrection of the Christ, another Hunger Games, and a Michael Jackson film that was doing well. He may sell Lionsgate into M&A rumors if it reaches the mid-teens or low-20s levels implied by CEO incentive targets. Walker counters: “Tell me who the buyer is” — the catalog “gets empty pretty quickly after John Wick and Hunger Games” — and flags his own bombed-out-SaaS signaling plays, RPD (Jana cleared to go to 20%) and timeshares like VAC.

Deep dive

1. The pitch: $12 stock, $25–30 of parts, and a hard catalyst inside two years

• Howe’s framing: Liberty Global has been a sum-of-the-parts story for a decade of Malone’s consolidate-with-cheap-debt playbook that “really has not worked out well” — the difference now is a stated breakup. Step one was spinning Swiss telecom Sunrise Communications; “it hasn’t been a home run but it’s performed well,” with Liberty plus Sunrise up about 40% since the announcement. Step two: spin the Netherlands-based Ziggo Group, merged with the Belgian business.
• The arithmetic as he gave it: all debt sits non-recourse at the subsidiaries; the parent has $1.5B of cash (about $5/share) and $10/share of public and private investments — “even if you haircut those by 50%… you get $10 of value between the cash and the investments.” Add $12 from Ziggo and a VMO2 JV stake worth “at a minimum probably about three bucks”: “stock trades at $12 today, I think it’s probably worth 25 to 30.”
• Why the value actually unlocks this time: it is a 100% spin of Liberty’s 90% stake in a multibillion-dollar company, not a tracker or a tiny stub prone to indiscriminate selling — “for better or worse, they’re going to force the market to value this business independently… in two years we’re going to find out.” His honest caveat on timing: “I just don’t have conviction in when the market’s going to start paying attention.”

2. Walker’s opening salvo: SOTP decks are a warning sign

• Walker’s confession, worth keeping verbatim in spirit: “I have never invested in a company that published that sum of the parts deck and made money in it. Like literally never.” His reframe of the standard question — the market isn’t missing this; management is “beating you over the head with here’s our value” and the market still doesn’t believe them.
• The buyback tell: Fries says “we are capital allocation animals,” claims $15/share of financial assets alone — yet after repurchasing 5% of the stock in 2025, “this year they’re buying back 0%.” Walker argues that if topco cash is used to pay down subco debt, that is “transferring firm value from the topco which could be used to buy back shares at this huge discount… it strikes me as disingenuous a little bit.”
• Howe doesn’t fight it: “I think that’s totally fair… if they believe the sum of the parts is a lot higher, they should be buying back stock right now — especially on the precipice of this value creation event.” Both then shrug: “we’re just yelling into the wind.”

3. Howe’s deleveraging defense and the dividend playbook

• The mechanical answer: Ziggo sits somewhere in the “low fives to mid fives” turns of debt, and “they couldn’t spin this asset out if it has five and a half turns… I don’t think the reception would be particularly good.” So every dollar of Ziggo/Telenet cash flow plus guided proceeds of $1.2B from selling infrastructure assets such as Wyre and towers goes to getting from 5.5x to 4.5x, where “every dollar used to delever translates directly to equity value.”
• The pattern-recognition piece: a signaled dividend anchors spin-off investors — “I’ve seen that time and again: Kontoor Brands, Jackson Financial, and Targa Resources.” It gives investors confidence and signals management is confident in its free-cash-flow ability. Sunrise taught them that “the dividend was incredibly important to the equity story.”

4. Ziggo on the ground: KPN’s fiber assault and a narrowing bleed

• Walker’s structural worry first — Fries’s calls are all financial engineering: “I know they think Ziggo should be valued at an 11.5% free cash flow yield, but they have not mentioned once how Ziggo is performing.” His history lesson: Malone’s crowd anchors on trailing free cash flow in telecom, where “your free cash flow number is a trailing metric” — a cable company that stops capex looks like a 40% FCF machine right before “all the subs start churning.”
• Howe’s operational read, with his own hedge (“I’m not a European telco expert”): KPN’s fiber overbuild left Ziggo “hemorrhaging broadband customers.” A new CEO since May 2024 has adjusted pricing, renegotiated contracts to cut churn, simplified offerings, put $50M of OpEx and $50M of CapEx into network reliability, and struck a capex-free Delta Fiber wholesale deal adding access to 600K Netherlands households so Ziggo can say “anywhere you are in the Netherlands, we have a plan for you.”
• The result and the risk: the reported loss trend improved from 30,000 subscribers per month a year ago to 8,000 in the current quarter — a 75% improvement — with hopes of “stable to slightly growing.” Howe’s bottom line: “That’s the biggest thing I’m worried about… I think the business has to at least be stable, because that was the case with Sunrise.”

5. The widow maker: Fries, Malone, and governance concerns

• Walker’s texted-friends anecdote carries the sentiment: everyone who’s followed Liberty alongside him replied, “I can’t do it with Mike Fries again. I just cannot do it with him.” The track record he can’t square: Malone’s memoir praises Fries most among his CEOs, yet the stock is flat over 15 years; meanwhile Malone called Discovery “a free cash flow machine” in 2019 (a dying one) and named Qurate his portfolio’s best value in 2021 — “here we are 5 years later and they’re filing for BK.”
• The governance layer: a staggered board in a controlled company, directors since 2005 aged 72, 80, and 86, one at 88, thin stock ownership, Fries in Denver running politically sensitive European assets, and Malone (85, possibly no longer even on the board) holding the votes. Walker: “the definition of insanity would probably be me being the thousandth investor to get burned 17 times on Liberty Global.”
• Howe’s concession-plus-distinction: “honestly, that’s a fair pushback” — but his confidence isn’t in this board creating value through M&A; “I think it’s easier to make money when you’re breaking things up… separating the assets makes 100% sense, no matter who the CEO is.” The VIC dating was imprecise: 2018 was mentioned, while Walker also noted an August 2020 A-shares write-up.

6. The $3.4B growth portfolio: haircut it 50%, or fear the holdco discount

• What’s inside per Howe: Formula E, which he estimates generated about $200M of 2024 revenue and might be worth $400–600M at “two to three times revenue” — “do the cars sound really cool? Yes,” but he believes it is still generating a decent operating loss. Also AtlasEdge, formed with DigitalBridge in 2021; EdgeConneX; Plume’s Wi-Fi mesh business; and roughly $100M each of Lionsgate and ITV. Howe believes the top five investments are about 65% of value. Management cites 30–35% IRRs on $1.6B monetized over five years, but “it’s just really hard to hang your hat on anything,” so: “haircut it all by 50% and call it a day.”
• Walker’s deeper objection isn’t the marks — it’s the trajectory: he believes management said it may start charging the portfolio a management fee, and a call addressed whether Liberty was looking at an NBA franchise in Europe. Management responded that it looks at everything that comes its way, which Howe took as evidence they are not winding down the portfolio. Walker can’t find support for the claimed Deloitte fair value. “I worry they’re turning themselves into basically a private equity sports firm… this is how you get holdco discounts pretty quickly”; in a hypothetical no-catalyst vehicle, he would apply a 50–70% discount.

7. VMO2: the banana still isn’t out of the jar

• Howe expects Ziggo to spin by the end of next year, then sees attention turning to VMO2 — 5.5x levered, with “the fundamental story… even less encouraging than Ziggo,” but the same infrastructure-sale deleveraging playbook applies. He sees “$3 at a minimum to like $15 of value.” The VMO2 JV partner was rumored to be considering buying the business at a high enterprise value last year and Liberty popped — though the discussion notes Telefónica has a ton of debt, so shareholders may not have wanted that.
• Walker’s long-memory laugh: VMO2 was the Virgin Media–O2 merger Malone framed as “getting the banana out of the jar” in an overbuilt UK market — “here we are 5 years later and it’s a mess and we still need to get the banana out of the jar in some way.”

8. The lightning round: Ziff Davis, dark arts, and Lionsgate one more time

• Howe owns Ziff Davis: nobody believed the SOTP until March’s sale of the connectivity division to Accenture at “a massive, massive premium”; it still trades at roughly 2.5x pro forma EBITDA, and management said at a stock price of about $45, “this is great, but it’s still not enough… if our stock stays here, we’re going to continue to sell assets.” His concern: they keep making acquisitions — about $3B over the years — and haven’t said what the cash is for. Walker’s precedent: once one big asset sells, watch the puck — CommScope, NVRI.
• Walker’s current hunting ground is “corporate dark arts” signaling in bombed-out SaaS: RPD, where Jana owns 10% with permission to go to 20% and management just got stock-price-heavy targets (tracking position, products “probably aren’t that great,” but “cheap cheap cheap”); plus timeshares like VAC granting upside-skewed compensation after a decade of underperformance.
• On Lionsgate — which Howe owns into a strong FY27 slate including The Resurrection of the Christ, another Hunger Games, and a Michael Jackson film that was doing well — his thesis is to sell if the stock reaches the mid-teens or low-20s levels implied by CEO incentive targets, potentially into M&A rumors. Walker’s pushback: “Who’s the buyer? Tell me who the buyer is.” Amazon wouldn’t redo MGM, Paramount–Warner Bros could be “a mess… potential BK,” and the catalog “gets empty pretty quickly after John Wick and Hunger Games.” His humility check from Versant: they discussed it in the low 30s, it is at about 41 — “there’s a price for everything.”