Why We Love the Capital Markets

One of my absolutely favorite things to read about is when companies make investments that actually work, and work very well.  A few weeks back the President and CEO of Liberty Media, Gregory Maffei, was on CNBC’s Squawk Box talking about his company.  If you have never heard of Liberty Media they are “kings of content” and own various media assets, from the Atlanta Braves, to 17% of Barnes & Noble, 26% of Live Nation, and now 53% of Sirius XM.  Specifically Mr. Maffei was discussing Liberty’s investment in Sirius XM Radio.  Here is the breakdown of the investment:

  • Liberty loaned Sirius XM $400 Million & Liberty paid $12,500 for a “convertable preferred” option to buy SIRI stock.
  • Sirius pays back the $400 million loan in full just five months later.
  • Liberty also had charged some fees for that loan and was up on the investment by $50 million.
  • Liberty excercised their preferred option and that $12,500 investment is now worth $8 billion.

This is what is so great about the capital markets.  Sirius was on bankrupty’s door and had no where to turn, so Liberty stepped in and made a bet that the business would recover.  Liberty practiced the Warren Buffett method of investing, “Be fearful when others are greedy, and greedy when others are fearful.”

Full video from Squawk is below: