John Malone Buys $75 Million in Discovery Stock

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John Malone

"He has a better track record than Warren Buffett, so anytime he is buying more of something, it is a good sign for the outlook and the stock," says one analyst.

After recently selling his remaining stake in Lionsgate, billionaire investor and media mogul John Malone has acquired more stock of Discovery in what is believed to be his largest or one of his largest open-market purchases of the stock ever.

A regulatory filing Monday showed that the media mogul on Thursday bought 2.67 million shares of Discovery Class C stock for $28.03, or around $75 million overall, boosting his direct ownership of Class C stock to more than 10.3 million shares. Including stock held by his spouse and a trust, Malone has nearly 12.2 million of these Discovery shares.

Malone, who has a reputation for being an astute investor, made the purchase despite Discovery's stock having run up around 20 percent year-to-date.

The mogul's economic stake in Discovery has been at around 3 percent, and the stock he acquired last week is non-voting stock, but his economic stake in the company is higher at around 23 percent thanks to super-voting shares.

"He has a better track record than Warren Buffett, so anytime he is buying more of something, it is a good sign for the outlook and the stock," Pivotal Research Group analyst Jeff Wlodarczak told THR. In line with that, Discovery stock moved higher in premarket activity.

Since an Oct. 3 regulatory filing showed that Malone had sold his remaining voting stock in Lionsgate, Wall Street observers have been wondering where the renowned dealmaker would put his money next. 

Days after, Malone's cable operator Liberty Latin America agreed to acquire AT&T's Puerto Rico and U.S. Virgin Islands operations for $1.95 billion in cash as the spinoff from the mogul's Liberty Global continues to expand in the region. Now, he has increased his bet on Discovery.

Discovery shares on Friday closed at $29.72, closer to their 52-week high of $32.87 than their 52-week low of $23.79. The stock had a big 12 percent gain Nov. 7 after the company's third-quarter earnings exceeded analysts' expectations. Malone previously bought Discovery stock in 2017, close to 500,000 shares, and, via a trust, in 2018, around 550,000 shares. 

Monday's stock purchase filing also mentioned that Malone pledged 3.65 million of his Discovery shares as part of a "zero-cost collar" arrangement, which one Wall Street observer described as a trading strategy that allows investors to offset  risk. Malone is known for using methods to reduce investment risk and ensure tax efficiency. The collar means that he can possibly sell 3.65 million Discovery shares in 2027, depending on their price at the time.