$GLIBK - John Malone on GCI at Liberty Media's Investor Day last week:

And the spin-off of a little company that I'm going to talk about in a minute, GCI out of Liberty Broadband because I was already over 50 of the voting control of Liberty Broadband, I end up in hard control of it. And it will be, let's say, by next summer, the only company that I expect to still be on the Board of, a public company, where I'll be Chairman, at least until it figures out what its strategy is.

I personally believe I can start another Liberty Media with appropriate strategy and capital structure using that as a core vehicle. It got spun off with extraordinarily good tax attributes. Guess that, why would you think that? And I think a sustainable cash flow generation, relatively modest capital investment requirements to sustain the business. And I think it is appropriate to think of as a vehicle for growth and for recreating something like the original Liberty Media. The benefit, of course, is that the great staff at Liberty Media that has been assembled, the young folks, quite talented are available to support that enterprise on a contractual basis.

And I've asked some close friends of mine to be involved. Now I made the original investment, I believe, in the Alaska Communications business in 1989, I believe, Ron Duncan, who's been consistently its CEO since, done a great job. It does a wonderful job for the state of Alaska. It's not like most companies, it doesn't face multiple competitors in every aspect of its business. It's a duopoly really in the cellular business in the larger towns and it's a virtual monopoly in terms of the terrestrial broadband business.

So it's a little different than what you see under a lot of stress in terms of the average cable company right now or old cable company. So that differentiates it. But using my thesis that you can do well by accumulating undervalued assets, sheltering them, sheltering their taxes, appropriately managing their tax liabilities and their use of capital, I think, it represents kind of an interesting opportunity for me and for anybody else who chooses to come along. We are doing -- we've announced the rights offering where we're going to raise $300 million of new equity. It's not an over levered business. It's only levered about 2.7x with pretty good debt.

So I'm setting it up basically to be able to do deals and grow. And I personally am backstopping the $300 million rights offering. So we'll see what happens. It's an interesting thing.

[Later on]:

Well, first of all, on my scheme for what do I do with GCI. When markets dump sectors. They're not very discriminatory, okay? They throw the baby out with the bathwater. So trust me in this huge world, we've got there are a number of communications businesses that are going to generate a lot of free cash flow for a very long time that are selling very cheap okay? And so the goal is to find those, be selective, own enough of them that when you shrink them, you're just driving up your own economics, okay?

Same model. And shelter their free cash flow because you have extraordinary tax attributes, use financial engineering where it's appropriate. When we created the spin-off vehicle GCIL, we did it in the state of Nevada, which has much more flexible charter governance than Delaware. We set it up with the ability to do tracking stocks, for instance, to do preferred of anything I can dream up. I might point out the first Liberty Media when we first created it was because we didn't think we were getting appropriate valuation on miscellaneous assets.

We threw them into an entity called Liberty Media. We did a simultaneous incorporation. Within a month or so of its creation, I issued a preferred stock, distributed to all Liberty Media shareholders that had a bigger face value than the market cap of the company because I wanted to shift tax basis from common to preferred. And then those people who wanted to recover their tax bases like me, could sell the preferred, recover the capital and go forward with an equity that was more levered, but without a risky type of leverage because the preferreds were very soft and very flexible.

And so it was a little financial engineering, but it was very important to effectively in one transaction, double the value of the common equity, which effectively happened. So financial engineering in some situations is important and the flexibility to do so is important. So that's kind of the way I look at it. So I look at opportunities in a space that I'm familiar with.

If you can't find them in the space you're familiar with, you look at tangential synergies where your tax attributes, your financial attributes, your timing, you can be truly opportunistic. I mean what the hell did we know about satellite radio when Sirius became an opportunity, for instance.

So being opportunistic, making sure you've got flexibility and currency to be able to take advantage of opportunities when they present themselves. I think -- so timing is a very important thing. I think that's the way I see it as an opportunity because I've got some pretty smart staff members over at LMC. The other thing you have to understand about LMC, the vast -- they were saying -- have been saying grace that staff over a number of public companies that LMC has nothing to do with it, right? On a contractual basis. So as a practical matter, the Liberty staff has been running everything from Sirius to Liberty Broadband and so on.

➡️ If you are interested in learning more about why John Malone is stepping back from Liberty Media and Liberty Global but remaining at GCI to turn it into an advantaged acquirer, go to Hidden Gems Investing to read the report I just published (link below) 

The report is 30 pages with a 1 page summary and is based on interviews with 17 sources. It covers: 

1. What does this opportunity exist?

2. GCI's economics and competitive advantages

3. The threat of Starlink

4. John Malone's strategy to turn GCI into an advantaged acquirer

5. Valuation scenarios 

I hope you enjoy it!