TCI Music, Thanks to New Net-Malone Cachet, Is Liberty’s Largest Holding

A newfound association with the Internet and the reputation of cable maverick John Malone has turned little-known TCI Music overnight into the largest holding in the portfolio of Liberty Media, surpassing the value of the media company’s 9% stake in Time Warner, its 21% share of USA Networks, and its 15% of a wireless telephone partnership with Sprint.

TCI Music, which was worth less than $1 billion on Monday, is now being valued by the market at an astounding $10 billion, after Liberty on Tuesday announced a plan to shift stakes in several Internet companies to TCI Music, whose assets currently include the Box cable music channel and the SonicNet online music site.

TCI Music, heretofore a largely overlooked and underperforming stock, closed at $46.75 on Wednesday in Nasdaq trading, up from $29.56 on Tuesday and from roughly $8 a share on Monday.

The $9 billion in additional market value will cost TCI Music, at current prices, roughly $1.1 billion in stock. Under the proposed transaction with Liberty, TCI Music will issue Liberty new shares in the company that will increase its stake to 95% from the current 86%. Liberty will contribute its stakes in such online sites as Priceline.com, Sportsline USA, IVillage and Drugstore.com.

“With Liberty owning all but 5%, there’re only 10 million shares outstanding and huge demand from Internet mutual funds that want it in their portfolio,” said Derek Baine, an analyst at Paul Kagan Associates, which is invested in Liberty.