Andrew Bary
The market may be missing something the media mogul John Malone sees.
He is high on GCI Liberty, an Alaskan telecom and broadband spinoff from his Liberty Broadband that began trading on the Nasdaq on Tuesday. Investors, however, have given GCI Liberty a cool early reception.
That could add up to a buying opportunity.
Spinoffs are a fertile area for investors to find bargains. They often emerge cheaply as holders of stock in the corporate parent dump shares they receive via the deals, and Wall Street takes its time to understand the stories of the newly independent companies. Spinoff winners have included GE Vernova, cereal maker W.K. Kellogg, and Millrose Properties, which emerged from home builder Lennar earlier this year.
GCI Liberty's nonvoting stock, with the ticker GLIBK, ended Tuesday at $31, little changed on the session from where it had been trading on a when-issued basis. No Wall Street firms have formally begun coverage of the company, but one analyst had expected a price range of $32 to $39 a share before the stock began trading.
The stock is valued at a discount to its peers in cable, broadband, and telecom at about five times trailing annual operating income before interest, depreciation and amortization. That metric, known as Oibda, is similar to earnings before interest, taxes, depreciation, and amortization, or Ebitda.
The two largest cable and broadband companies, Comcast and Charter Communications, are valued at about six and seven times trailing Ebitda, respectively. AT&T is at about eight times.
GCI is generating little attention in part because it is a small-cap company with a market value of $900 million , plus net debt of about $1 billion. There are about 29 million shares outstanding
The 84-year-old Malone, who is chairman and controlling shareholder of GCI Liberty thanks to ownership of supervoting stock, ticked off some positives at an investor event in June. He cited tax benefits, "modest debt leverage," and a declining need for capital that raises the possibility cash could be returned to shareholders.
Malone noted that Charter was trading at about seven times Ebitda. Citing what he called GCI Liberty's "superior" free cash flow, he said, "I think this business should be trading at a premium to that."
If GCI Liberty traded at seven times Oibda of $383 million in the 12 months ending in March, it would be valued at more than $50 a share, Barron's estimates.
The company hasn't declared a dividend, but that is a possibility. Malone said capital allocation would depend on the stock's valuation: If it trades cheaply, buybacks could be on the table. He said the company also would consider a dividend depending on its success in finding acquisition targets.
Malone also is the chairman of Liberty Media, which has spun off or merged several of its businesses in recent years, including the Atlanta Braves baseball team and a controlling stake in Sirius XM Holdings. Liberty Media's chief asset now is the Formula One racing business, traded with the ticker FWONK.
Liberty Broadband -- Malone is controlling shareholder and chairman -- holds roughly a quarter of the stock of Charter, and reached a deal to be purchased in Charter in late 2024. The transaction hasn't been completed yet.
Under the terms of the transaction, Liberty Broadband would spin off GCI Liberty to its shareholders. On Monday, the spinoff occurred, based on a ratio of 0.20 share of GCI Liberty for each Liberty Broadband share.
GCI Liberty is Alaska's largest telecom company, having operated in the state for more than 40 years. It provides data, wireless, and phone services across a vast, lightly populated area with a harsh climate and few connecting roads. The company has sometimes been referred to as a cable provider, but it no longer has video subscribers.
One competitor is Elon Musk's Starlink, which provides satellite-based internet services, though the company doesn't view Starlink as a serious threat outside the most remote parts of the state.
Led by CEO Ron Duncan, GCI Liberty has invested $4.7 billion in its network over the years. Its annual revenue are about $1 billion. It gets about 40% of its revenue from the federal Universal Service Fund, which offers subsidies to telecom and broadband customers in underserved areas.
There was some concern about that revenue source because a challenge to the fund went to the U.S. Supreme Court in the just-completed term. But the high court upheld the fund in a recent decision, which is a positive for GCI.
Malone has high hopes for GCI Liberty, telling investors last month that it could become a "new Liberty Media" with more than one business.
That may be too optimistic, but the company does amount to a cheap telecom play that could be in a position to return a sizable amount of cash to holders.
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This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 15, 2025 17:31 ET (21:31 GMT)
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