As filed with the Securities and Exchange Commission on December 20, 2022

REGISTRATION NO. 333-       ​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

ATLANTA BRAVES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)

12300 Liberty Boulevard, Englewood, Colorado 80112, (720) 875-5400
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed transactions described herein have been satisfied or waived, as applicable.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Information in this joint proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this joint proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

Subject to completion, dated December 20, 2022

LIBERTY MEDIA CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5400

[           ]​

Dear Stockholder:

You are cordially invited to a special meeting of stockholders of Liberty Media Corporation (Liberty Media) to be held at [           ], Mountain time, on [           ]. The special meeting will be held via the Internet and will be a completely virtual meeting of stockholders. You may attend the special meeting, access the stockholders list, submit questions and vote your shares electronically during the meeting via the Internet by visiting www.virtualshareholdermeeting.com/[           ]. To enter the special meeting, you will need the 16-digit control number that is printed in the box marked by the arrow on your proxy card. We recommend logging in at least fifteen minutes before the meeting to ensure that you are logged in when the meeting starts. Online check-in will start shortly before the meeting on [           ].

A notice of the special meeting, a proxy card and a joint proxy statement/prospectus containing important information about the matters to be acted on at the special meeting accompany this letter.

At the special meeting, holders of Liberty Media’s Series A Liberty Braves common stock (BATRA) and Series B Liberty Braves common stock (BATRB) will be asked to consider and vote on a proposal (the Split-Off Proposal) to approve the redemption by Liberty Media of each outstanding share of BATRA, BATRB and Liberty Media’s Series C Liberty Braves common stock (BATRK) in exchange for one share of the corresponding series of common stock of a newly formed, wholly owned subsidiary of Liberty Media, Atlanta Braves Holdings, Inc. (SplitCo). We refer to the redemption and the resulting separation of SplitCo from Liberty Media pursuant to the redemption as the Split-Off. After the Split-Off, SplitCo will hold all of the businesses, assets and liabilities currently attributed to Liberty Media’s Braves Group, including 100% of the ownership and voting interests in Braves Holdings, LLC, which is the owner of the Atlanta Braves Major League Baseball Club, and certain assets and liabilities associated with the Atlanta Braves Major League Baseball Club’s stadium and Braves Holdings’ mixed use development project and corporate cash. The intergroup interests in the Braves Group attributed to Liberty Media’s existing Liberty SiriusXM Group and Formula One Group remaining immediately prior to the Split-Off, however, will be settled and extinguished in connection with the Split-Off. SplitCo expects to list its shares of Series A common stock (New BATRA) and Series C common stock (New BATRK) on the Nasdaq Global Select Market under the symbols “BATRA” and “BATRK,” respectively. SplitCo currently expects that its Series B common stock (New BATRB) will trade on the OTC Markets under the symbol “BATRB.” SplitCo will be an “emerging growth company” as the term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, has elected to comply with certain reduced public company reporting requirements.

Additionally, at the special meeting, holders of BATRA, BATRB, BATRK, Liberty Media’s Series A Liberty SiriusXM common stock (LSXMA), Series B Liberty SiriusXM common stock (LSXMB), Series C Liberty SiriusXM common stock (LSXMK), Series A Liberty Formula One common stock (FWONA), Series B Liberty Formula One common stock (FWONB) and Series C Liberty Formula One common stock (FWONK) (BATRA, BATRB, BATRK, LSXMA, LSXMB, LSXMK, FWONA, FWONB and FWONK, collectively, Liberty Media common stock) will be asked to consider and vote on a group of related proposals, which we refer to as the Reclassification Proposals, each of which are conditioned on the approval of the Split-Off, to approve the adoption of an amendment and restatement of Liberty Media’s certificate of

incorporation (as so amended and restated, the Liberty Media restated charter) to, among other things, following the completion of the Split-Off, (i) reclassify Liberty Media’s then-outstanding shares of common stock, which will consist of LSXMA, LSXMB, LSXMK, FWONA, FWONB and FWONK, into three new tracking stocks to be designated the Liberty SiriusXM common stock, the Liberty Formula One common stock and the Liberty Live common stock, and, in connection therewith, provide for the attribution of the businesses, assets and liabilities of Liberty Media’s existing Liberty SiriusXM Group and Formula One Group among Liberty Media’s newly created Liberty SiriusXM Group (New Liberty SiriusXM Group), Formula One Group (New Formula One Group) and Liberty Live Group (Liberty Live Group), (ii) reclassify each share of Liberty Media’s then-outstanding Liberty SiriusXM common stock into newly issued shares of common stock of Liberty Media as described below and (iii) reclassify each share of Liberty Media’s then-outstanding Liberty Formula One common stock into newly issued shares of common stock of Liberty Media as described below. We refer to reclassification of the then-outstanding shares of Liberty Media common stock and the associated attribution of Liberty Media’s businesses, assets and liabilities into three new tracking stock groups as the Reclassification.

If the Reclassification Proposals are approved and the Reclassification is implemented, at the date and time of the effectiveness of the Liberty Media restated charter, each outstanding share of LSXMA, LSXMB, LSXMK, FWONA, FWONB and FWONK would be reclassified as follows:

•

one share of LSXMA shall be reclassified into [   ] of a share of a new Series A Liberty SiriusXM common stock (New LSXMA) and [   ] of a share of a new Series A Liberty Live common stock (LLYVA);

​

•

one share of LSXMB shall be reclassified into [   ] of a share of a new Series B Liberty SiriusXM common stock (New LSXMB) and [   ] of a share of a new Series B Liberty Live common stock (LLYVB);

​

•

one share of LSXMK shall be reclassified into [   ] of a share of a new Series C Liberty SiriusXM common stock (New LSXMK) and [   ] of a share of a new Series C Liberty Live common stock (LLYVK);

​

•

one share of FWONA shall be reclassified into [   ] of a share of a new Series A Liberty Formula One common stock (New FWONA) and [   ] of a share of LLYVA;

​

•

one share of FWONB shall be reclassified into [   ] of a share of a new Series B Liberty Formula One common stock (New FWONB) and [   ] of a share of LLYVB; and

​

•

one share of FWONK shall be reclassified into [   ] of a share of a new Series C Liberty Formula One common stock (New FWONK) and [   ] of a share of LLYVK.

​

Cash will be paid in lieu of any fractional shares. The shares of New LSXMA, New LSXMB and New LSXMK (collectively, the New Liberty SiriusXM common stock) would be newly authorized and issued shares of three series of common stock of Liberty Media intended to track and reflect the separate economic performance of the businesses, assets and liabilities to be attributed to the New Liberty SiriusXM Group, which would initially include: Liberty Media’s approximately 82% interest in Sirius XM Holdings Inc. (Sirius XM Holdings), corporate cash, Liberty Media’s 1.375% Cash Convertible Senior Notes due 2023 and related financial instruments, Liberty Media’s 2.125% Exchangeable Senior Debentures due 2048, Liberty Media’s 2.75% Exchangeable Senior Debentures due 2049 and margin loan obligations incurred by Liberty Media’s wholly owned special purpose subsidiary, which are secured by shares of common stock of Sirius XM Holdings, together with certain shares of New BATRA expected to be issued in connection with the settlement and extinguishment of the intergroup interest in the Braves Group attributed to the Liberty SiriusXM Group remaining immediately prior to the Split-Off and certain other assets and liabilities currently attributed to the Liberty SiriusXM Group. The shares of New FWONA, New FWONB and New FWONK (collectively, the New Liberty Formula One common stock) would be newly authorized and issued shares of three series of common stock of Liberty Media intended to track and reflect the separate economic performance of the businesses, assets and liabilities to be attributed to the New Formula One Group, which would initially include: Liberty Media’s interests in Formula 1, corporate cash, Liberty Media’s 1% Cash Convertible Notes due 2023 and Liberty Media’s 2.25% Convertible Senior Notes due 2027, together with certain other assets and liabilities currently attributed to the Formula One Group. The shares of LLYVA, LLYVB and LLYVK (collectively, the Liberty Live common stock) would be newly authorized and issued shares of three series of common stock of Liberty Media intended to track and reflect the separate economic performance of the businesses, assets and liabilities to be attributed to the new Liberty Live Group, which would initially include: all of the businesses, assets and liabilities of Liberty Media other than

those specifically attributed to the New Liberty SiriusXM Group or the New Formula One Group, including Liberty Media’s approximately 31% interest in Live Nation Entertainment, Inc. (Live Nation), corporate cash, certain public and private assets currently attributed to the Formula One Group, Liberty Media’s 0.5% Exchangeable Senior Debentures due 2050, margin loan obligations incurred by Liberty Media’s wholly owned special purpose subsidiary, which are secured by shares of common stock of Live Nation, together with other assets as may be determined by Liberty Media.

The New Liberty SiriusXM common stock, the New Liberty Formula One common stock and the Liberty Live common stock will be tracking stock intended to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of Liberty Media as a whole. Holders of tracking stock have no direct claim to the group’s stock or assets and therefore do not own, by virtue of their ownership of a Liberty Media tracking stock, any equity or voting interest in a company, such as Sirius XM Holdings or Live Nation, in which Liberty Media holds an interest that is attributed to a Liberty Media tracking stock group, such as the New Liberty SiriusXM Group or the Liberty Live Group. Holders of a tracking stock are also not represented by separate boards of directors. Instead, holders of a tracking stock are stockholders of Liberty Media, with a single board of directors and subject to all of the risks and liabilities of Liberty Media as a whole.

If the Split-Off Proposal is approved and certain other conditions are satisfied (or, if permissible, waived), we expect to complete the Split-Off as soon as practical after the special meeting and we will announce the date and time of the Split-Off shortly following the special meeting. If the Reclassification Proposals are approved and certain other conditions are satisfied (or, if permissible, waived), we expect to complete the Reclassification as soon as practical after the Split-Off and we will announce the date and time of the Reclassification shortly following the special meeting. Each of the Reclassification Proposals is conditioned on the approval of the Split-Off Proposal. The Split-Off Proposal, however, is not conditioned on the approval of any of the Reclassification Proposals.

Liberty Media expects to list the shares of New LSXMA, New LSXMB, New LSXMK, New FWONA, New FWONK, LLYVA and LLYVK on the Nasdaq Global Select Market under the symbols “LSXMA,” “LSXMB,” “LSXMK,” “FWONA,” “FWONK,” “LLYVA,” and “LLYVK,” respectively. We currently expect that the shares of New FWONB and LLYVB will trade on the OTC Markets under the symbols “FWONB” and “LLYVB,” respectively.

The Liberty Media board has approved and declared advisable the Split-Off Proposal and each of the Reclassification Proposals (together with a related proposal that would permit Liberty Media to adjourn the special meeting to solicit further proxies), and the transactions contemplated by each of them, and recommends that the holders of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK vote “FOR” each of them, as applicable.

Liberty Media is seeking approval from holders of BATRA, BATRB and (for certain proposals) BATRK of both the Split-Off Proposal and the Reclassification Proposals. You are encouraged to vote “FOR” all of the proposals presented and further described in the accompanying joint proxy statement/prospectus.

Liberty Media is seeking approval from holders of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK of each of the Reclassification Proposals. You are encouraged to vote “FOR” all of the Reclassification Proposals presented and further described in the accompanying joint proxy statement/prospectus.

Your vote is important, regardless of the number of shares you own. Whether or not you plan to attend the special meeting, please vote as soon as possible to make sure that your shares are represented.

Thank you for your cooperation and continued support and interest in Liberty Media.

Very truly yours,

Gregory B. Maffei
President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of any of the proposals or the securities being offered in the Split-Off or the Reclassification or has passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

Investing in the securities of SplitCo or Liberty Media involves risks. See “Risk Factors” beginning on page 39.

The accompanying joint proxy statement/prospectus is dated [           ] and is first being mailed on or about [           ] to the stockholders of record as of 5:00 p.m., New York City time, on [           ].

 

LIBERTY MEDIA CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5400

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be Held on [           ]

NOTICE IS HEREBY GIVEN of the special meeting of stockholders of Liberty Media Corporation (Liberty Media) to be held at [           ], Mountain time, on [           ]. The special meeting will be held via the Internet and will be a completely virtual meeting of stockholders to consider and vote on the following proposals:

1.

A proposal (the Split-Off Proposal) to approve the redemption by Liberty Media of each outstanding share of Liberty Media’s Series A Liberty Braves common stock (BATRA), Series B Liberty Braves common stock (BATRB) and Series C Liberty Braves common stock (BATRK) in exchange for one share of the corresponding series of common stock of a newly formed, wholly owned subsidiary of Liberty Media, Atlanta Braves Holdings, Inc. (SplitCo). We refer to the redemption and the resulting separation of SplitCo from Liberty Media pursuant to the redemption as the Split-Off. After the Split-Off, SplitCo will hold all of the businesses, assets and liabilities currently attributed to Liberty Media’s Braves Group, including 100% of the ownership and voting interests in Braves Holdings, LLC, which is the owner of the Atlanta Braves Major League Baseball Club, and certain assets and liabilities associated with the Atlanta Braves Major League Baseball Club’s stadium and Braves Holdings’ mixed use development project and corporate cash.

​

2.

The following related proposals (the Reclassification Proposals), each of which are conditioned on the approval of the Split-Off:

​

(a)

a proposal (the Tracking Stock Proposal) to approve the adoption of an amendment and restatement of Liberty Media’s restated certificate of incorporation (the certificate of incorporation), to, among other things, following the completion of the Split-Off, reclassify Liberty Media’s then outstanding shares of common stock, which will consist of its Series A Liberty SiriusXM common stock (LSXMA), Series B Liberty SiriusXM common stock (LSXMB), Series C Liberty SiriusXM common stock (LSXMK), Series A Liberty Formula One common stock (FWONA), Series B Liberty Formula One common stock (FWONB) and Series C Liberty Formula One common stock (FWONK), into three new tracking stocks to be designated the Liberty SiriusXM common stock, the Liberty Formula One common stock and the Liberty Live common stock, and, in connection therewith, provide for the attribution of the businesses, assets and liabilities of Liberty Media’s existing Liberty SiriusXM Group and Formula One Group among Liberty Media’s newly created Liberty SiriusXM Group, Formula One Group and Liberty Live Group.

​

(b)

a proposal (the Liberty SiriusXM Group Recapitalization Proposal) to approve the adoption of an amendment and restatement of Liberty Media’s certificate of incorporation, in connection with the reclassification of Liberty Media’s then outstanding shares of common stock, to, among other things, following the completion of the Split-Off, reclassify each outstanding share of LSXMA, LSXMB and LSXMK, as follows:

​

•

one share of LSXMA shall be reclassified into [      ] of a share of a new Series A Liberty SiriusXM common stock and [      ] of a share of a new Series A Liberty Live common stock (LLYVA);

​

•

one share of LSXMB shall be reclassified into [      ] of a share of a new Series B Liberty SiriusXM common stock and [      ] of a share of a new Series B Liberty Live common stock (LLYVB);

​

•

one share of LSXMK shall be reclassified into [      ] of a share of a new Series C Liberty SiriusXM common stock and [      ] of a share of a new Series C Liberty Live common stock (LLYVK);

​

 

5

 

(c)

a proposal (the Formula One Group Recapitalization Proposal) to approve the adoption of an amendment and restatement of Liberty Media’s certificate of incorporation, in connection with the reclassification of Liberty Media’s then outstanding shares of common stock, to, among other things, following the completion of the Split-Off, reclassify each outstanding share of FWONA, FWONB and FWONK, as follows:

​

•

one share of FWONA shall be reclassified into [   ] of a share of a new Series A Liberty Formula One common stock and [   ] of a share of LLYVA;

​

•

one share of FWONB shall be reclassified into [   ] of a share of a new Series B Liberty Formula One common stock and [   ] of a share of LLYVB; and

​

•

one share of FWONK shall be reclassified into [   ] of a share of a new Series C Liberty Formula One common stock and [   ] of a share of LLYVK.

​

3.

A proposal (the Adjournment Proposal) to approve the adjournment of the special meeting by Liberty Media from time to time to solicit additional proxies in favor of the Split-Off Proposal and/or the Reclassification Proposals if there are insufficient votes at the time of such adjournment to approve the Split-Off Proposal and/or the Reclassification Proposals or if otherwise determined by the chairperson of the meeting to be necessary or appropriate.

​

Each of the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal (collectively, the Reclassification Proposals) is dependent on the others, and none of them will be implemented unless they are all approved. In addition, the Reclassification Proposals are dependent and conditioned on the approval of the Split-Off Proposal, and none of them will be implemented unless the Split-Off Proposal is approved and the Split-Off is completed. The Split-Off is conditioned on the receipt of the requisite approval of the Split-Off Proposal but not on the receipt of the requisite approval of any of the Reclassification Proposals.

Liberty Media will transact no other business at the Liberty Media special meeting, except such business as may properly be brought before the Liberty Media special meeting or any adjournments or postponements thereof by or at the direction of the Liberty Media board of directors in accordance with Liberty Media’s amended and restated bylaws. The accompanying joint proxy statement/prospectus describes the proposals listed above in more detail. Please refer to the joint proxy statement/prospectus, including the forms of the proposed amended and restated SplitCo certificate of incorporation and the proposed amended and restated certificate of incorporation of Liberty Media and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the Liberty Media special meeting. You are encouraged to read the entire document carefully before voting. In particular, please see “Risk Factors” beginning on page 39 for an explanation of the risks associated with the transactions contemplated by the Split-Off Proposal and the Reclassification Proposals.

Holders of record of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK, in each case, outstanding as of 5:00 p.m., New York City time, on [                 ], the record date for the special meeting, will be entitled to notice of the special meeting and to vote on the proposals, as applicable, at the special meeting or any adjournment or postponement thereof as follows:

•

Holders of record of BATRA and BATRB will be entitled to vote on the Split-Off Proposal. Holders of BATRK, LSXMA, LSXMB, LSXMK, FWONA, FWONB and FWONK are not being asked to vote, and are not entitled to vote, on the Split-Off Proposal because such vote is not required by Liberty Media’s certificate of incorporation or the laws of the State of Delaware.

​

•

Holders of record of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK will be entitled to vote on each of the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal. Holders of BATRA, BATRB and BATRK should note that they are entitled to vote on these proposals pursuant to the terms of Liberty Media’s certificate of incorporation even though the Reclassification will occur following the Split-Off.

​

•

Holders of record of LSXMA, LSXMB, BATRA, BATRB, FWONA and FWONB will be entitled to vote on the Adjournment Proposal. Holders of LSXMK, BATRK and FWONK are not being

​

 

6

 

asked to vote, and are not entitled to vote, on the Adjournment Proposal because such vote is not required by Liberty Media’s certificate of incorporation or the laws of the State of Delaware.

The proposals described above require the following stockholder approvals:

•

The Split-Off Proposal requires the affirmative vote of the holders of a majority of the aggregate voting power of the shares of BATRA and BATRB outstanding as of the record date, in each case, entitled to vote and that are present in person or by proxy at the special meeting, voting together as a separate class. Pursuant to Liberty Media’s certificate of incorporation, with respect to the Split-Off Proposal, each holder of record of BATRA is entitled to one vote per share and each holder of record of BATRB is entitled to ten votes per share.

​

•

Each of the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal requires the affirmative vote of the holders of

​

(i)

a majority of the aggregate voting power of the shares of LSXMA, LSXMB, BATRA, BATRB, FWONA and FWONB outstanding as of the record date, in each case, entitled to vote at the special meeting, voting together as a single class;

​

(ii)

a majority of the aggregate voting power of the shares of LSXMA, LSXMB and LSXMK outstanding as of the record date, in each case, entitled to vote at the special meeting, voting together as a separate class;

​

(iii)

a majority of the aggregate voting power of the shares of BATRA, BATRB and BATRK outstanding as of the record date, in each case, entitled to vote at the special meeting, voting together as a separate class; and

​

(iv)

a majority of the aggregate voting power of the shares of FWONA, FWONB and FWONK outstanding as of the record date, in each case, entitled to vote at the special meeting, voting together as a separate class.

​

Pursuant to Liberty Media’s certificate of incorporation, with respect to the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal, each holder of record of LSXMA is entitled to one vote per share, each holder of record of LSXMB is entitled to ten votes per share and (with respect to the separate class vote referenced in clause (ii) above) each holder of record of LSXMK is entitled to 1/100 of a vote per share; each holder of record of BATRA is entitled to one vote per share, each holder of record of BATRB is entitled to ten votes per share and (with respect to the separate class vote referenced in clause (iii) above) each holder of record of BATRK is entitled to 1/100 of a vote per share; and each holder of record of FWONA is entitled to one vote per share, each holder of record of FWONB is entitled to ten votes per share and (with respect to the separate class vote referenced in clause (iv) above) each holder of record of FWONK is entitled to 1/100 of a vote per share.

•

The Adjournment Proposal requires the approval of the holders of a majority of the aggregate voting power of the shares of LSXMA, LSXMB, BATRA, BATRB, FWONA and FWONB outstanding as of the record date, in each case, entitled to vote and that are present in person or by proxy at the special meeting, voting together as a single class. Pursuant to Liberty Media’s certificate of incorporation, with respect to the Adjournment Proposal, each holder of record of LSXMA, BATRA or FWONA is entitled to one vote per share and each holder of record of LSXMB, BATRB or FWONB is entitled to ten votes per share.

​

The Liberty Media board of directors has approved and declared advisable each enumerated proposal, and the transactions contemplated by each of them, and recommends that the holders of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK vote “FOR” each of them, as applicable.

 

7

 

Liberty Media is seeking approval from holders of BATRA, BATRB and (for certain proposals) BATRK of each of the proposals described above, including the Split-Off Proposal, the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal. You are encouraged to vote “FOR” all of the proposals presented and further described in the accompanying joint proxy statement/prospectus.

Liberty Media is seeking approval from holders of LSXMA, LSXMB, LSXMK, BATRA, BATRB, BATRK, FWONA, FWONB and FWONK of each of the Reclassification Proposals, including the Tracking Stock Proposal, the Liberty SiriusXM Group Recapitalization Proposal and the Formula One Group Recapitalization Proposal. You are encouraged to vote “FOR” each of the Reclassification Proposals presented and further described in the accompanying joint proxy statement/prospectus.

A list of stockholders entitled to vote at the special meeting will be available at Liberty Media’s offices in Englewood, Colorado for review by its stockholders for any purpose germane to the special meeting for at least 10 days prior to the special meeting.

You may cast your vote electronically during the Liberty Media special meeting via the Internet or by proxy prior to the meeting via the Internet, by telephone, or by mail. You may attend the special meeting, access the stockholders list, submit questions and vote your shares electronically during the meeting via the Internet by visiting www.virtualshareholdermeeting.com/[                 ]. To enter the special meeting, you will need the 16-digit control number that is printed in the box marked by the arrow on your proxy card. We recommend logging in at least fifteen minutes before the meeting to ensure that you are logged in when the meeting starts. Online check-in will start shortly before the meeting on [                 ].

YOUR VOTE IS IMPORTANT. Liberty Media urges you to vote as soon as possible by telephone, Internet or mail.

By order of the board of directors,

Michael Hurelbrink
Assistant Vice President and Secretary

Englewood, Colorado
[        ]

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE VOTE PROMPTLY VIA TELEPHONE OR ELECTRONICALLY VIA THE INTERNET. ALTERNATIVELY, PLEASE COMPLETE, SIGN AND RETURN BY MAIL THE ENCLOSED PROXY CARD.

 

8

 

ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference into this joint proxy statement/prospectus, see “Additional Information — Where You Can Find More Information.” This information is available to you without charge upon your written or oral request. You can obtain copies of documents filed by Liberty Media with the Securities and Exchange Commission (the SEC), including the documents incorporated by reference in this joint proxy statement/prospectus, through the SEC website at www.sec.gov or by contacting Liberty Media by writing or telephoning the office of Investor Relations:

Liberty Media Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Telephone: (720) 875-5400

If you would like to request any documents, please do so at least five business days before the date of the special meeting, in order to receive them before the special meeting.

We are not incorporating the contents of the websites of the SEC, Liberty Media, or any other entity into this joint proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this joint proxy statement/prospectus at these websites only for your convenience.

 

9

 

TABLE OF CONTENTS

 

10

 

 

11

 

 

12

 

INDEX TO FINANCIAL STATEMENTS

Annex A: Form of SplitCo Restated Charter*

Annex B: Form of SplitCo Amended Bylaws*

Annex C: Form of Liberty Media Restated Charter*

Annex D: Unaudited Illustrative Attributed Financial Information of Liberty Media

*

To be filed by amendment.

​

 

13

 

This joint proxy statement/prospectus describes the businesses and assets of SplitCo as though they were its businesses and assets for all historical periods described. However, SplitCo is a newly formed entity that will not have conducted any operations prior to the Split-Off and instead will have had such businesses and assets transferred to it prior to the Split-Off. References in this joint proxy statement/prospectus to the historical assets, liabilities, businesses or activities of SplitCo’s businesses or the businesses in which it has interests are intended to refer to the historical assets, liabilities, businesses or activities as they were conducted or held by Liberty Media prior to the Split-Off. Upon completion of the Split-Off, SplitCo will be an independent, publicly traded company, and following the Liberty Media Exchange (defined below) and the Formula One Distribution (defined below), Liberty Media will have no continuing stock ownership in SplitCo. The historical combined financial information of SplitCo as part of Liberty Media contained in this joint proxy statement/prospectus is not necessarily indicative of SplitCo’s future financial position, future results of operations or future cash flows, nor does it reflect what the financial position, results of operations or cash flows of SplitCo would have been had it been operated as a stand-alone company during the periods presented.

You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than the date set forth on the cover page of this joint proxy statement/​prospectus. Changes to the information contained herein may occur after that date and neither SplitCo nor Liberty Media undertake any obligation to update the information unless required to do so by law.

None of the Office of the Commissioner of Baseball (the BOC or MLB or Major League Baseball), any of the member clubs of the BOC or their affiliates (other than Liberty Media and its affiliates as described herein), or any of their respective owners, officers, directors, members, managers, employees or representatives make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in, or assume any liability for any inaccuracies in or omissions from, this joint proxy statement/prospectus, or any of the transactions discussed herein.

 

14

 

​

15

 

16

 

​

17

 

​

18

 

​

19

 

​

20

 

​

21

 

​

22

 

​

23

 

24

 

​

25

 

​

26

 

27

 

28

 

29

 

​

30

 

​

31

 

​

32

 

33

 

34

 

35

 

36

 

​

​

​

Liberty SiriusXM common stock Series B (LSXMB)

​

​

​

​

High

​

​

Low

​

2021

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

47.42

​

​

​

​

​

42.06

​

​

Second Quarter

​

​

​

​

51.70

​

​

​

​

​

43.68

​

​

Third Quarter

​

​

​

​

52.10

​

​

​

​

​

45.70

​

​

Fourth Quarter

​

​

​

​

58.13

​

​

​

​

​

48.08

​

​

2022

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

53.04

​

​

​

​

​

44.92

​

​

Second Quarter

​

​

​

​

47.14

​

​

​

​

​

40.00

​

​

Third Quarter

​

​

​

​

46.75

​

​

​

​

​

36.50

​

​

Fourth Quarter (through December 16, 2022)

​

​

​

​

47.43

​

​

​

​

​

39.51

​

​

​

​

​

Liberty Braves common stock Series B (BATRB)

​

​

​

​

High

​

​

Low

​

2021

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

31.00

​

​

​

​

​

26.25

​

​

Second Quarter

​

​

​

​

34.00

​

​

​

​

​

31.00

​

​

Third Quarter

​

​

​

​

29.00

​

​

​

​

​

26.00

​

​

Fourth Quarter

​

​

​

​

45.00

​

​

​

​

​

27.00

​

​

2022

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

27.98

​

​

​

​

​

26.05

​

​

Second Quarter

​

​

​

​

28.61

​

​

​

​

​

26.05

​

​

Third Quarter

​

​

​

​

30.01

​

​

​

​

​

25.40

​

​

Fourth Quarter (through December 16, 2022)

​

​

​

​

35.00

​

​

​

​

​

29.75

​

​

37

 

​

​

​

Liberty Formula One common stock Series B (FWONB)

​

​

​

​

High

​

​

Low

​

2021

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

43.10

​

​

​

​

​

43.02

​

​

Second Quarter

​

​

​

​

43.93

​

​

​

​

​

38.75

​

​

Third Quarter

​

​

​

​

52.00

​

​

​

​

​

42.40

​

​

Fourth Quarter

​

​

​

​

56.70

​

​

​

​

​

49.33

​

​

2022

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

​

56.66

​

​

​

​

​

54.75

​

​

Second Quarter

​

​

​

​

70.26

​

​

​

​

​

54.75

​

​

Third Quarter

​

​

​

​

63.00

​

​

​

​

​

53.59

​

​

Fourth Quarter (through December 16, 2022)

​

​

​

​

55.00

​

​

​

​

​

47.78

​

​

38

 

RISK FACTORS

In addition to the other information contained in, incorporated by reference in or included as an Annex to this joint proxy statement/prospectus, you should carefully consider the following risk factors in deciding whether to vote to approve the Split-off Proposal and the Reclassification Proposals.

The risk factors described in this section have been separated into two groups:

•

risks that relate to the Split-Off Proposal, which include risks relating to SplitCo’s corporate history and the Split-Off, risks relating to SplitCo’s business and risks relating to an investment in SplitCo common stock; and

​

•

risks that relate to the Reclassification Proposal, which include risks relating to an investment in Liberty Media common stock due to its tracking stock capitalization, risks relating to Liberty Media as a whole and risks relating to the businesses to be attributed to the New Liberty SiriusXM Group, New Formula One Group and Liberty Live Group.

​

The risks described below and elsewhere in this joint proxy statement/prospectus are considered to be the most material but are not the only ones that relate to the Split-Off and to the Reclassification. There may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects on SplitCo, Liberty Media or on an investment in any of its groups of common stock. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods especially given the current economic environment.

If any of the events described below were to occur, the businesses, prospects, financial condition, results of operations and/or cash flows to be attributed to SplitCo or to the New Liberty SiriusXM Group, the New Formula One Group, or the Liberty Live Group could be materially adversely affected. In any such case, the price of any or all of the SplitCo common stock and/or any of Liberty Media’s New Liberty Sirius XM common stock, the New Liberty Formula One common stock or the Liberty Live common stock could decline, perhaps significantly. For the purposes of the risk factors relating to the Split-Off enumerated below, unless the context otherwise indicates, Liberty Media has assumed that the Split-Off Proposal is approved and that the Split-Off has been completed, and for the purposes of the risk factors relating to the Reclassification enumerated below, unless the context otherwise indicates, Liberty Media has assumed that the Reclassification Proposal is approved and that the Reclassification has been completed.

Factors Relating to the Split-Off Proposal

Factors Relating to SplitCo’s Corporate History and the Split-Off

The historical financial information of SplitCo included in this joint proxy statement/prospectus is not necessarily representative of SplitCo’s future financial position, future results of operations or future cash flows.

In valuing shares of SplitCo common stock, investors should recognize that the historical financial information of SplitCo included in this joint proxy statement/prospectus has been extracted from Liberty Media’s historical consolidated financial statements and does not necessarily reflect what SplitCo’s results of operations, financial condition and cash flows would have been had it been a separate, stand-alone company pursuing independent strategies during the periods presented.

SplitCo may incur material costs as a result of its separation from Liberty Media.

SplitCo will incur costs and expenses not previously incurred as a result of the Split-Off. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with the federal securities laws (including compliance with the Sarbanes-Oxley Act), tax administration and human resources related functions. Although Liberty Media will continue to provide many of these services for SplitCo under the Services Agreement, neither SplitCo nor Liberty Media can assure you that the Services Agreement will continue or that these costs will not be material to SplitCo’s business.

 

39

 

SplitCo’s inter-company agreements are being negotiated while it is still a subsidiary of Liberty Media.

SplitCo will enter into a number of inter-company agreements covering matters such as tax sharing and allocation of responsibility for certain liabilities previously undertaken by Liberty Media for certain of SplitCo’s businesses. In addition, SplitCo will enter into the Services Agreement with Liberty Media pursuant to which Liberty Media will provide SplitCo certain management, administrative, financial, treasury, accounting, tax, legal and other services, for which SplitCo will reimburse Liberty Media on a fixed fee basis. The terms of all of these agreements are being established while SplitCo is a wholly-owned subsidiary of Liberty Media, and therefore may not be the result of arms’ length negotiations. SplitCo believes that the terms of these inter-company agreements are and will be commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Split-Off. See “Certain Relationships and Related Party Transactions — Relationships between SplitCo and Liberty Media.”

SplitCo has no operating history as a separate company upon which you can evaluate its performance.

Although the business of SplitCo has been operated as a separate tracking stock group of Liberty Media, SplitCo does not have an operating history as a separate public company. Accordingly, there can be no assurance that its business will be successful on a long-term basis. SplitCo may not be able to grow its businesses as planned and may not be profitable.

SplitCo may have a significant indemnity obligation to Liberty Media, which is not limited in amount or subject to any cap, if the Split-Off Transactions are treated as a taxable transaction.

Pursuant to the Tax Sharing Agreement that SplitCo and Liberty Media will enter into in connection with the Split-Off, SplitCo will be required to indemnify Liberty Media, its subsidiaries and certain related persons for taxes and losses resulting from the failure of the Split-Off Transactions to qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code to the extent that such taxes and losses (i) result primarily from, individually or in the aggregate, the breach of certain covenants made by SplitCo (applicable to actions or failures to act by SplitCo and its subsidiaries following the completion of the Split-Off), (ii) result from the application of Section 355(e) of the Code to the Split-Off Transactions as a result of the treatment of the Split-Off Transactions as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50% or greater interest (measured by vote or value) in the stock of SplitCo (or any successor corporation) or (iii) result from any excess loss account (within the meaning of applicable U.S. Treasury Regulations) in the SplitCo common stock, or gain recognized under Section 361(b) due to the application of the basis limitation in the last sentence of Section 361(b)(3) of the Code, arising from any payments made by (or deemed distributions from) SplitCo to Liberty Media following the Split-Off.

SplitCo’s indemnification obligations to Liberty Media, its subsidiaries and certain related persons will not be limited in amount or subject to any cap. If SplitCo is required to indemnify Liberty Media, its subsidiaries or such related persons under the circumstances set forth in the Tax Sharing Agreement, SplitCo may be subject to substantial liabilities, which could materially adversely affect its financial position.

For a more detailed discussion of the Tax Sharing Agreement, see “Certain Relationships and Related Party Transactions — Relationships Between SplitCo and Liberty Media — Tax Sharing Agreement.”

SplitCo may determine to forgo certain transactions in order to avoid the risk of incurring significant tax-related liabilities.

Under the Tax Sharing Agreement, SplitCo will agree not to take any action, or fail to take any action, following the Split-Off, which action or failure to act is inconsistent with the Split-Off Transactions qualifying for tax-free treatment under Section 355, Section 368(a)(1)(D) and related provisions of the Code. Further, the Tax Sharing Agreement will require that SplitCo generally indemnify Liberty Media for any taxes or losses incurred by Liberty Media (or its subsidiaries) to the extent that such taxes and losses (i) result primarily from, individually or in the aggregate, the breach of certain covenants made by SplitCo (applicable to actions or failures to act by SplitCo and its subsidiaries following the completion of the Split-Off), (ii) result from the application of Section 355(e) of the Code to the Split-Off Transactions as a result of the treatment of the

 

40

 

Split-Off Transactions as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50% or greater interest (measured by vote or value) in the stock of SplitCo (or any successor corporation) or (iii) result from any excess loss account (within the meaning of applicable U.S. Treasury Regulations) in the SplitCo common stock, or gain recognized under Section 361(b) due to the application of the basis limitation in the last sentence of Section 361(b)(3) of the Code, arising from any payments made by (or deemed distributions from) SplitCo to Liberty Media following the Split-Off.

Under Section 355(e) of the Code, an acquisition of SplitCo’s stock would generally be presumed to be part of a plan (or series of related transactions) with the Split-Off Transactions if such acquisition occurs within two years before or after the Split-Off (or if such stock is received in the Split-Off in exchange for Liberty Braves common stock or as a distribution on Liberty Formula One common stock that was acquired within the two years before the Split-Off). This presumption, however, may be rebutted based upon an analysis of the facts and circumstances related to the Split-Off Transactions and the particular acquisition in question, including a weighing of certain plan and non-plan factors set forth in Treasury Regulations promulgated under Section 355(e) of the Code. Further, these Treasury Regulations provide certain safe harbors under which an acquisition will be deemed not to be part of a plan (or series of related transactions) with the Split-Off for purposes of Section 355(e) of the Code.

In light of the requirements under Section 355 of the Code, including the factors and safe harbors described above, SplitCo may determine to forgo certain transactions that might otherwise be advantageous. In particular, SplitCo may determine to continue to operate certain of its business operations for the foreseeable future even if a sale of such business operations might otherwise be advantageous. Moreover, in light of the requirements of Section 355(e) of the Code, SplitCo might determine to forgo certain transactions, including share repurchases, stock issuances, certain asset dispositions and other strategic transactions, for some period of time following the Split-Off. In addition, SplitCo’s indemnity obligation under the Tax Sharing Agreement might discourage, delay or prevent its entering into a change of control transaction for some period of time following the Split-Off Transactions.

The Split-Off Transactions could result in significant tax liability.

The Split-Off is conditioned upon the receipt by Liberty Media of (i) the opinion of Skadden Arps, tax counsel to Liberty Media, and (ii) the Ruling from the IRS, in each case to the effect that, among other things, the Split-Off Transactions will qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D), and related provisions of the Code to Liberty Media and to holders of Liberty Braves common stock and Liberty Formula One common stock (except with respect to the receipt of any cash in lieu of fractional shares). The condition relating to the receipt of the opinion of Skadden Arps may not be waived; however, the condition relating to the receipt of the Ruling is waivable by the Liberty Media board of directors.

Although any Ruling that is obtained will generally be binding on the IRS, the continued validity of the Ruling will be subject to the accuracy of factual statements and representations made to the IRS by Liberty Media upon which the Ruling is based. Further, as a result of the IRS’s general ruling policy with respect to transactions under Section 355 of the Code, the Ruling will not represent a determination by the IRS that certain requirements necessary to obtain tax-free treatment to Liberty Media and to holders of Liberty Braves common stock and Liberty Formula One common stock under Sections 355 and 368(a)(1)(D) of the Code (specifically, the corporate business purpose requirement, the requirement that the Split-Off Transactions not be used principally as a device for the distribution of earnings and profits, and the non-application of Section 355(e) of the Code to the Split-Off Transactions (discussed below)), have been satisfied. Rather, the Ruling will be based upon representations made to the IRS by Liberty Media that these requirements have been satisfied. If any of the statements or representations upon which the Ruling is based are incorrect or untrue in any material respect, or the facts upon which the Ruling is based were materially different from the facts at the time of the Split-Off, the Ruling could be invalidated.

In addition, opinions of counsel are not binding on the IRS or the courts, and there can be no assurance that the IRS will not challenge the conclusions reached in such opinion or that a court would not sustain such a challenge. If it is subsequently determined that the Split-Off Transactions do not qualify for tax-free treatment, Liberty Media and the holders of Liberty Braves common stock and Liberty Formula One common stock who receive SplitCo common stock pursuant to the Split-Off Transactions could incur significant tax liabilities. For a more complete discussion of the tax opinion and the tax consequences if the

 

41

 

Split-Off Transactions are not tax-free, please see “U.S. Federal Income Tax Consequences — Tax Opinions and — U.S. Federal Income Tax Consequences of the Split-Off.”

Even if the Split-Off Transactions otherwise qualify under Section 355, Section 368(a)(1)(D), and related provisions of the Code, the Split-Off Transactions would result in a significant U.S. federal income tax liability to Liberty Media (but not to holders of Liberty Braves common stock or Liberty Formula One common stock) under Section 355(e) of the Code if one or more persons acquire, directly or indirectly, a 50% or greater interest (measured by either vote or value) in the stock of Liberty Media or in the stock of SplitCo (or any successor corporation) (excluding, for this purpose, the acquisition of SplitCo common stock by holders of Liberty Braves common stock and Liberty Formula One common stock in the Split-Off Transactions) as part of a plan or series of related transactions that includes the Split-Off Transactions. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual in nature, and subject to a comprehensive analysis of the facts and circumstances of the particular case. Notwithstanding the opinion of Skadden Arps described above, Liberty Media or SplitCo might inadvertently cause or permit a prohibited change in the ownership of Liberty Media or SplitCo to occur. If the Split-Off Transactions were determined to be taxable to Liberty Media under Section 355(e) of the Code, Liberty Media would incur significant tax liabilities. For a more complete discussion of the tax consequences if the Split-Off Transactions are determined to be taxable to Liberty Media under Section 355(e) of the Code, please see “U.S. Federal Income Tax Consequences — U.S. Federal Income Tax Consequences of the Split-Off.”

SplitCo and/or Liberty Media may not realize the potential benefits from the Split-Off in the near term or at all.

Liberty Media anticipates the realization of strategic and financial benefits to SplitCo and Liberty Media as a result of the separation of SplitCo from Liberty Media. See “The Split-Off Proposal — Reasons for the Split-Off and the Reclassification.” In particular, Liberty Media believes that the Split-Off will benefit Liberty Media and its businesses and result in the creation of stockholder value because, among other things, the aggregate trading value of SplitCo’s common stock and Liberty Media’s common stock is expected to exceed the aggregate trading value of Liberty Media’s existing common stock, although there can be no assurance that this will occur. Accordingly, there can be no assurance that the market will react favorably to the Split-Off, that the Split-Off will result in a trading price of the SplitCo common stock that reflects a reduced valuation discount than that currently applied to the Liberty Braves common stock or that the trading discount currently associated with the Liberty SiriusXM common stock will be reduced. In this case, SplitCo’s equity currency would not be as attractive to use for raising capital to fund its financial needs or for the retention and attraction of qualified personnel. Furthermore, Liberty Media may not experience the anticipated reduction in dilution to its stockholders when using its common stock for purposes of making strategic acquisitions and other capital raising initiatives and for retention and attraction of qualified personnel. Given the added costs associated with the completion of the Split-Off, including the separate accounting, legal and other compliance costs of being a separate public company, the failure of SplitCo and/or Liberty Media to realize the anticipated benefits of the Split-Off in the near term or at all could adversely affect their respective companies.

SplitCo may have overlapping directors and management with Liberty Media, which may lead to conflicting interests.

Executive officers of Liberty Media will also serve as executive officers of SplitCo pursuant to the Services Agreement that will be entered into between Liberty Media and SplitCo in connection with the completion of the Split-Off, and Gregory B. Maffei, President and Chief Executive Officer and a director of Liberty Media will also serve as the Chairman of the Board of SplitCo. The executive officers and the members of SplitCo’s board of directors will have fiduciary duties to its stockholders. Likewise, any such persons who serve in similar capacities at Liberty Media have fiduciary duties to its stockholders. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting their respective companies. For example, there may be the potential for a conflict of interest when SplitCo or Liberty Media looks at acquisitions and other corporate opportunities that may be suitable for each of them. Further, as allowed by Nevada law, the SplitCo restated charter renounces any interest or expectancy in certain business opportunities involving directors and officers of

 

42

 

SplitCo, which will allow such directors and officers to pursue those business opportunities without being liable to SplitCo or its stockholders for a breach of fiduciary duties arising out of such opportunities. Moreover, SplitCo’s Chairman of the Board and its officers will continue to own Liberty Media common stock, restricted stock units and options to purchase Liberty Media common stock. These ownership interests could create, or appear to create, potential conflicts of interest when these individuals are faced with decisions that could have different implications for SplitCo or Liberty Media. Any potential conflict that could qualify as a “related party transaction” ​(as defined in Item 404 of Regulation S-K) will be subject to review by an independent committee of the applicable issuer’s board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise would be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer. From time to time, Liberty Media or its respective affiliates may enter into transactions with SplitCo and/or its subsidiaries or other affiliates. Although the terms of any such transactions or agreements will be established based upon negotiations between employees of the companies involved, there can be no assurance that the terms of any such transactions will be as favorable to SplitCo or its subsidiaries or affiliates as would be the case where the parties are completely at arms’ length.

It is expected that Mr. Malone will own approximately [      ]% of the outstanding voting power of SplitCo, which may be deemed to put him in a position to influence significant corporate actions and may discourage others from initiating a potential change of control transaction that may be beneficial to SplitCo stockholders.

As of [   ], Mr. Malone beneficially owned shares of Liberty Braves common stock representing the power to direct approximately [   ]% of the aggregate voting power of the Liberty Braves common stock and immediately following the Split-Off, Mr. Malone is expected to beneficially own shares of SplitCo common stock (based on [   ] shares of Liberty Braves common stock outstanding and [   ] notional shares representing the intergroup interests in the Braves Group attributed to the Liberty SiriusXM Group and the Formula One Group, in each case, as of [   ]) representing the power to direct approximately [   ]% of the aggregate voting power of the SplitCo common stock. Furthermore, although Mr. Malone is a party to an Exchange Agreement with Liberty Media whereby, among other things, Mr. Malone agreed to an arrangement under which his aggregate voting power in Liberty Media would not exceed 49% plus 0.5% (under certain circumstances), Mr. Malone is not expected to be an officer or director of SplitCo, thus, pursuant to the terms of the Liberty Media Exchange Agreement, SplitCo and Mr. Malone will not be required to and are not expected to enter into such an arrangement in connection with the Split-Off. As a result of Mr. Malone’s ownership interests and voting power, it is expected that Mr. Malone may continue to be deemed to be in a position to influence significant corporate actions, including corporate transactions such as mergers, business combinations or dispositions of assets. This concentration of ownership could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to SplitCo stockholders.

Liberty Media’s board of directors may abandon the Split-Off at any time, or its board of directors may determine to amend the terms of any agreement Liberty Media enters into relating to the Split-Off.

No assurance can be given that the Split-Off will occur, or if it occurs that it will occur on the terms described in this joint proxy statement/prospectus. In addition to the conditions to the Split-Off described herein (certain of which may be waived by the Liberty Media board of directors in its sole discretion), the Liberty Media board of directors may abandon the Split-Off at any time prior to the effective time of the Split-Off (the Split-Off effective time) for any reason or for no reason. Additionally, the agreements to be entered into by SplitCo with Liberty Media in connection with the Split-Off (including the Reorganization Agreement, the Tax Sharing Agreement, the Services Agreement, the Facilities Sharing Agreement and the aircraft time sharing agreements) may be amended or modified prior to the Split-Off effective time in the sole discretion of Liberty Media, as applicable. If any condition to the Split-Off is waived or if any material amendments or modifications are made to the terms of the Split-Off or to such ancillary agreements prior to the Split-Off, Liberty Media intends to promptly issue a press release and file a Current Report on Form 8-K informing the market of the substance of such waiver, amendment or modification.

 

43

 

Factors Relating to SplitCo’s Business

The financial success of SplitCo will depend, in large part, on the Braves achieving on-field success.

The financial results of SplitCo depend in large part on the ability of the Braves to achieve on-field success. The team’s successes generate significant fan enthusiasm, resulting in sustained ticket, premium seating, concession and merchandise sales, and greater shares of local television and radio audiences during that period. Furthermore, participation in MLB’s postseason provides the franchise with additional revenue and income. Additional revenue and income in the postseason are derived primarily from postseason games played at the Braves’ home stadium. Although the Braves did not generate material revenue from participation in the 2020 postseason since games were played without fans in attendance due to COVID-19, the Braves appeared in 16 out of 16 potential postseason games in 2021 and 4 out of 17 potential postseason games in 2022. Potential postseason games do not include games played in the National League Wild Card Series, in which the Braves were not eligible to participate because of their high seeding in the National League. Income from postseason play (after reduction for allocable postseason share payments) contributed approximately $67.8 million and $7.8 million of revenue in 2021 and 2022, respectively. While the Braves have made the MLB postseason during seven of the past eleven seasons, and were the 2021 World Series Champions, there can be no assurance that the team will perform well or qualify for postseason play during the next season or any season thereafter. Poor on-field performance by the Braves is likely to adversely affect the financial performance of SplitCo.

The success of the Braves will depend largely on their ability to develop, obtain and retain talented players.

The success of the Braves depends, in large part, on the ability to develop, obtain and retain talented players. The Braves compete with other MLB baseball teams and teams in other countries for available professional players and top player prospects. There can be no assurance that the Braves will be able to retain players upon expiration of their contracts or identify and obtain or develop new players of adequate talent to replace players who retire or are injured, traded, released or lost to free agency. Even if the Braves are able to retain or obtain players who have had successful amateur or professional careers, or develop talented players through the Braves’ minor league affiliates or otherwise, there can be no assurance that such players will perform successfully for the Braves. The 2017 penalties handed down by MLB against the Braves in the international market limited the Braves ability to recruit players internationally through the 2021 season, and could have an impact on the future pipeline of talent going forward.

The risk of injuries to key or popular players creates uncertainty and could negatively impact financial results.

A significant portion of the financial results of SplitCo will be dependent upon the on-field success of the Braves and injuries to players pose risk to that success. In addition, the Braves are currently scheduled to play 81 regular season road games each year, requiring players and members of the coaching staff to travel using charter carriers. The Braves’ extensive travel schedule exposes its players and coaching staff to the risk of travel-related accidents and injuries. An injury sustained by a key player, or an injury occurring at a key point in the season, could negatively impact the team’s performance and decrease the likelihood of postseason play. An injury sustained by a popular player could negatively impact fan enthusiasm, which could negatively impact ticket sales and other sources of revenue. Furthermore, after the start of each season, all MLB players under contract are generally entitled to all of their contract salary for the season, even after sustaining an injury (subject to certain rights of the Braves). Having to compensate a player who is unable to perform for a substantial period of the season, as well as the replacement for the injured player, could create a significant financial burden for the Braves. Long-term employment contracts provide for, among other items, annual compensation for certain players (current and former) and other employees. Amounts due under such contracts as of September 30, 2022 aggregated $912.4 million, which is payable as follows: $207.0 million in 2022, $171.3 million in 2023, $115.1 million in 2024, $96.0 million in 2025, $79.0 million in 2026 and $244.0 million thereafter. The Braves may or may not elect to obtain disability insurance for their players signed to multiyear contracts to partially mitigate these risks, but there can be no assurance that even if obtained that such insurance will compensate for all or substantially all of the costs associated with player injuries and such insurance would not serve to mitigate any potential negative impact on the team’s performance and revenue.

 

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Focus on team performance, and decisions by management, may negatively impact financial results in the short-term.

Management of Braves Holdings focuses on making operational and business decisions that enhance the on-field performance of the Braves and this may sometimes require implementing strategies and making investments that may negatively impact short-term profit for the sake of immediate on-field success. For example, in order to improve the short-term performance of the team, management may decide to make trades for highly compensated players and sign free agents or current players to high value contracts, which could significantly increase operating expenses for a given year, and which could adversely impact the trading price of the SplitCo common stock. In addition, to the extent higher salaries must be paid in order to retain talented players, the Braves may be subject to the Competitive Balance Tax imposed by the CBA (each as defined below) if the Braves’ aggregate average payroll exceeds the predetermined thresholds contained in the CBA. For more information about the Competitive Balance Tax, see “Description of SplitCo’s Business — MLB Rules and Regulations — Collective Bargaining Agreement — Competitive Balance Provisions.” Alternatively, management may decide to focus on longer-term success by investing more heavily in the recruiting and development of younger and less expensive talent, which may negatively affect the team’s current on-field success and in turn could have a negative impact on ticket sales and other sources of revenue. SplitCo must also comply with all MLB rules and decisions, which has significant authority over MLB teams and must act in the best interests of MLB as a whole. Such rules and decisions may be inconsistent with strategies adopted by management and may have a negative effect on the near-term value of SplitCo common stock.

The organizational structure of MLB and its rules and regulations impose substantial restrictions on the operations of SplitCo and its subsidiaries.

As a condition to maintaining its MLB membership, each MLB Club must comply with the rules and regulations adopted by MLB, as well as a series of other agreements and arrangements that govern the operation and management of an MLB Club (collectively, the MLB Rules and Regulations). See “Description of SplitCo’s Business — MLB Rules and Regulations.” For example, each MLB Club is subject to the Major League Constitution, the Major League Rules and the CBA. In addition, each MLB Club is required to appoint one “Control Person” who is acceptable to MLB and the other MLB Clubs and who has significant authority over club operations and the club’s interaction with MLB. Pursuant to the MLB Rules and Regulations and the CBA, an MLB Club must comply with, among other things, limitations on the amount of debt it can incur, revenue sharing arrangements with other MLB Clubs, commercial arrangements with regard to the national broadcasting of its games and other programming and commercial arrangements relating to the use of its intellectual property. Additionally, the vote of 75% of the MLB Clubs is required for the approval of the sale of any MLB Club or relocation of a franchise to another city.

The Braves will be required to abide by any changes to the MLB Rules and Regulations and the adoption of any new MLB Rules and Regulations, irrespective of whether such changes or new arrangements negatively impact the Braves, proportionately or disproportionately, as compared with the other MLB Clubs. Further, the Commissioner of Baseball interprets the MLB Rules and Regulations, and Braves Holdings (and certain of its affiliates) has agreed to submit any and all disputes related to the MLB Rules and Regulations, or disputes involving another MLB Club, to the Commissioner of Baseball as sole arbitrator. The decisions of the Commissioner of Baseball are binding and not appealable, and therefore Braves Holdings may not resort to the courts or any other means to enforce its rights or contest the application of the MLB Rules and Regulations. No assurance can be given that any changes to the MLB Rules and Regulations, adoption of new MLB Rules and Regulations or decisions made by the Commissioner of Baseball will not adversely affect SplitCo and its financial results and have a negative impact upon the value of the SplitCo common stock.

Organized labor matters could have an adverse effect on SplitCo’s financial results.

SplitCo’s business is dependent upon the efforts of unionized workers. MLB players are covered by the CBA. MLB has experienced labor difficulties in the past and may have labor issues in the future. Labor difficulties may include players’ strikes or protests or management lockouts. MLB has also had disputes with the labor union representing the major league umpires, which have resulted in strikes and the need to use

 

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replacement umpires. MLB experienced a players strike during the 1994 season, which resulted in a regular season that was shortened and the cancelation of the World Series. In December 2021, the previous collective bargaining agreement expired and MLB commenced a lockout of the Major League players. As a result of the lockout, the start of the 2022 regular season was delayed until the MLB Clubs reached a tentative agreement in March 2022 on the terms of the CBA in a Memorandum of Understanding and the regular season began in April. See “Description of SplitCo’s Business — MLB Rules and Regulations —  Collective Bargaining Agreement.” The CBA covers the 2022 through 2026 MLB seasons. Any labor disputes, such as players’ strikes, protests or lockouts, could postpone or cancel MLB games. No revenue will be recognized for cancelled games and the impact may have a material negative effect on SplitCo’s business and results of operations.

The possibility of MLB expansion could create increased competition.

The most recent MLB expansion occurred in 1998. MLB continues to evaluate opportunities to expand into new markets across North America. Because revenue from national broadcasting and licensing agreements are divided equally among all MLB Clubs, any such expansion could dilute the revenue realized by SplitCo from such agreements and increase competition for talented players among MLB Clubs. Historically, expansion teams have been permitted to select in an expansion draft certain unprotected players from the rosters of various MLB teams. There can be no assurance that the Braves will be able to retain key players during future expansion drafts or that the rules regarding expansion drafts will not change to the detriment of the Braves. Any expansion in the Southeast region of the United States, in particular, could also draw fan, consumer and viewership interest away from the Braves.

Viewership, and interest in baseball generally, may fluctuate due to factors outside of SplitCo’s control.

Viewership of professional baseball has decreased in recent years and any future decline in television ratings or attendance for MLB as a whole could have an adverse effect on SplitCo’s financial results. The Braves compete for entertainment and advertising dollars with other sports and entertainment activities. During parts of the MLB regular season, the Braves experience competition from college football, professional basketball (the Atlanta Hawks) and professional football (the Atlanta Falcons). As sporting and entertainment trends change, fans may be drawn to other spectator sports and entertainment options, in spite of on-field success by the Braves.

Broadcasting rights, both national and local, present an important source of revenue for SplitCo, and decreases in this broadcasting revenue could have an adverse effect on SplitCo’s financial results.

Braves Holdings derives revenue directly from the sale of their local broadcasting rights through an individually negotiated carriage or license agreement. The sale of their national broadcasting rights, together with those of all other MLB Clubs, is organized through MLB with all such revenue allocated consistent with the MLB Rules and Regulations. A majority of this revenue is reliant on a limited number of broadcasting partners. Solvency and business disruptions impacting SplitCo’s broadcasting partners, as well as any decline in television ratings, carriage disputes, popularity of the Braves specifically, or even MLB as a whole, could adversely affect the revenue that can be derived from the sale of these broadcasting rights.

SplitCo’s ability to incur indebtedness to fund its operations will be limited, which could negatively impact its operations.

Braves Holdings generally funds its operating activities through cash flow from operations and two credit facilities, with a combined borrowing capacity of $275 million. As of September 30, 2022, Braves Holdings had $55 million outstanding under these credit facilities. If cash flows become insufficient to cover operating or capital needs, SplitCo may be required to take on additional indebtedness, but applicable CBA rules limit the aggregate amount of indebtedness that the Braves may incur. See “Description of SplitCo’s Business — MLB Rules and Regulations — Collective Bargaining Agreement — Debt Service Rule.” Following its separation from Liberty Media, SplitCo will not have access to Liberty Media’s capital or credit and its ability to obtain significant financing on favorable terms, or at all, may be more limited as a standalone company than as a subsidiary of Liberty Media. Due to its size and current indebtedness at

 

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its level, together with its assets and operating cash flow, SplitCo may be unable to support any significant financing in the future.

If debt financing is not available to SplitCo in the future, SplitCo may obtain liquidity through the issuance and sale of its equity securities. If additional funds are raised through the issuance of equity securities, SplitCo’s stockholders may experience significant dilution. If SplitCo is unable to obtain sufficient liquidity in the future, Braves Holdings may be unable to continue to develop its business, complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on SplitCo’s business, financial condition and results of operations.

Certain covenants included in the documents governing indebtedness impose limitations on the liquidity of SplitCo.

In addition to the Debt Service Rule limitations imposed by the CBA limiting the amount of indebtedness that may be incurred by the Braves, the agreements governing the indebtedness incurred, directly or indirectly, by Braves Holdings, include certain covenants that will limit the ability of SplitCo to sell or otherwise transfer control over certain assets or equity interests of affiliated entities. These covenants could limit the flexibility of SplitCo to react to changing or adverse market conditions, which could have an adverse effect on the financial condition of SplitCo and could suppress the value of the SplitCo common stock.

SplitCo’s holding company structure could restrict access to funds of its subsidiaries that may be needed to pay third party obligations.

SplitCo is a holding company and its assets consist primarily of its investments in its subsidiaries, including Braves Holdings. As a holding company, SplitCo’s ability to meet its financial obligations to third parties is dependent upon its available cash balances, distributions from subsidiaries and other investments and proceeds from any asset sales. Further, SplitCo’s ability to receive dividends or payments or advances from its subsidiaries’ businesses depends on their individual operating results, any statutory, regulatory or contractual restrictions to which they are or may become subject and the terms of their indebtedness and any additional debt they may incur in the future. From time to time, SplitCo’s subsidiaries may consider opportunities to refinance such debt, including through use of cash on hand and capital markets transactions. Accordingly, SplitCo’s ability to make payments to third parties and to otherwise meet its financial obligations at the holding company level is constricted.

SplitCo’s subsidiaries have incurred and are expected to continue to incur significant indebtedness, including borrowings used or to be used to finance the construction, development and/or ongoing operations of Braves Holdings, the Braves’ stadium, the Development Project and a spring training facility, which could negatively impact SplitCo’s financial condition.

Braves Holdings has, directly or indirectly through subsidiaries, taken on a significant level of debt and increased expenses related to the development of the Braves’ stadium, its mixed use development project (the Development Project) and its spring training facility. As of September 30, 2022, Braves Holdings had approximately $215 million outstanding under various debt instruments for construction and other stadium-related costs, $301 million outstanding under various credit facilities and loans for the Development Project and $30 million outstanding under a credit facility for the spring training facility. These construction and development expenditures will increase SplitCo’s costs and indebtedness in the near term, which could have a negative impact on Braves Holdings’ credit worthiness and the value of the SplitCo common stock.

The financial performance of SplitCo may be materially adversely affected if it does not experience the anticipated benefits of the Development Project in the near term or at all.

Braves Holdings is incurring a significant amount of capital expenditures and indebtedness in connection with the construction and development of the Development Project. Although SplitCo believes that the new stadium and mixed use development will result in a material increase in revenue over the short and long term, including as a result of increased game attendance and rental income from the Development Project, no assurance can be given that attendance will increase as anticipated or that the potential benefits of the

 

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Development Project will be fully realized. To the extent that the long-term anticipated benefits of the Development Project do not materialize and SplitCo does not experience sustained revenue, SplitCo’s costs, including its new debt service obligations, could materially adversely affect SplitCo’s financial results, which is likely to suppress the value of the SplitCo common stock.

Development activities, such as those associated with the Development Project, are subject to significant risks.

Risks associated with real estate development projects, such as the Development Project, relate to, among other items, adverse changes in national market conditions (which can result from political, regulatory, economic or other factors), changes in interest rates, competition for, and the financial condition of, tenants, the cyclical nature of property markets, adverse local market conditions, changes in the availability of debt financing, real estate tax rates and other operating expenses, zoning laws and other governmental rules and fiscal policies, energy prices, population trends, risks and operating problems arising out of the presence of certain construction materials, acts of God, uninsurable losses and other factors which are beyond the control of the developer and may make the underlying investments economically unattractive. Development activities also involve the risk that construction may not be completed within budget or on schedule because of cost overruns, work stoppages, shortages of building materials, the inability of contractors to perform their obligations under construction contracts, defects in plans and specifications or various other factors, including natural disasters. In addition, Braves Holdings has only been managing the mixed use development since 2017 and although real estate developers and other real estate experts have been engaged to assist in its efforts, SplitCo may not be able to fully realize the projected long-term returns and benefits of its real estate development efforts. Any of these risks could result in substantial unanticipated delays or expenses associated with the Development Project, which could have an adverse effect on SplitCo’s financial condition and suppress the value of the SplitCo common stock.

Failure of lessees of the Development Project to renew their leases as they expire and improvement costs associated with new leases may adversely impact SplitCo’s cash flow from operations, which could negatively impact its financial condition.

If Development Project lessees do not renew their leases as they expire, SplitCo may not be able to re-lease that space in the Development Project. In addition, in connection with securing lease renewals or re-leasing properties, SplitCo may agree to terms that are less economically favorable than expiring lease terms, or may be required to incur significant costs, such as renovations and improvements on behalf of the lessee. Furthermore, a significant portion of the costs of owning property, such as real estate taxes, insurance and maintenance, are not necessarily reduced when circumstances cause a decrease in rental revenue from the properties. Any of these events could adversely affect SplitCo’s cash flow from operations and its ability to service its indebtedness, which could negatively impact its financial condition.

Negative market conditions or adverse events affecting existing or potential lessees of the Development Project or the industries in which they operate, could have an adverse impact on SplitCo’s ability to attract new lessees, collect rent or renew leases at the Development Project, which could adversely affect SplitCo’s cash flow from operations and inhibit growth.

Cash flow from operations depends in part on SplitCo’s ability to lease space in the Development Project on economically favorable terms and to collect rent from lessees on a timely basis. SplitCo could be adversely affected by various facts and events over which it has limited or no control, such as:

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Lack of or loss of demand for the amount of commercial and retail space developed and being developed at The Battery Atlanta;

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Inability to retain existing lessees and attract new lessees;

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Changes in market rental rates;

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Declines in lessees’ creditworthiness and ability to pay rent, which may be affected by their operations, economic downturns and competition within their industries from other operators;

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Defaults by and bankruptcies of lessees, failure of lessees to pay rent on a timely basis, or failure of lessees to comply with their contractual obligations;

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Economic or physical decline of the areas around Truist Park and The Battery Atlanta; and

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Deterioration of physical condition of properties in the Development Project.

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At any time, any Development Project lessee may experience a downturn in its business that may weaken its operating results or overall financial condition. As a result, such lessee may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. The bankruptcy or insolvency of a Development Project lessee could diminish the revenue SplitCo receives as a result of a lease termination or other concessions, such as reduced rent payable, and SplitCo’s ability to seek payment for unpaid future rent would be substantially limited, if not eliminated. Any lessee bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in material losses to SplitCo and could adversely affect SplitCo’s cash flow from operations and its ability to service its indebtedness.

Braves Holdings has been, and may continue to be, materially impacted by COVID-19 and local, state and federal government actions taken in response, which may have a negative impact on SplitCo’s results of operations and financial condition.

The global spread of COVID-19 prompted most local, state, federal and foreign governmental agencies to impose travel restrictions and local quarantines or stay at home restrictions to contain the spread. As a result, the business operations of Braves Holdings initially were largely, if not completely, suspended at the outset of COVID-19. Prior to late-July 2020, all MLB games were postponed, with a portion of spring training in 2020 for teams also having been cancelled. The Development Project was affected due to the impacts of these restrictions on retail as well as restaurants, which had initially been limited to take-out and/or delivery service. However, beginning in July 2020, MLB resumed games, although with no fan attendance.

The Braves’ 2021 regular baseball season was comprised of 161 games, which approximates the number of regular season games held in years prior to the COVID-19 pandemic. Braves Holdings had limitations on the number of fans in attendance at certain games in 2021, thereby reducing revenue associated with fan attendance. It is unclear whether and to what extent future COVID-19 concerns will continue to impact the use of and/or demand for the entertainment and events provided by Braves Holdings and demand for sponsorship and advertising assets. If Braves Holdings continues to face cancelled events and reduced attendance, the impact may substantially decrease SplitCo’s revenue. Due to the revenue reductions caused by COVID-19 to date, Braves Holdings has looked to reduce expenses, but should such impacts resume, Braves Holdings may not be able to reduce expenses to the same degree as any decline in revenue, which may adversely affect SplitCo’s results of operations and cash flow.

In addition, Braves Holdings is particularly sensitive to reductions in discretionary consumer spending. SplitCo cannot predict the time period over which its businesses will be impacted by COVID-19. Over the long-term, COVID-19 could impede economic activity in impacted regions or globally, causing a global recession, leading to a further decline in discretionary spending on sports and entertainment events and other leisure activities, which could result in long-term effects on SplitCo’s businesses.

Even as SplitCo’s businesses have resumed more normal operations, there can be no assurances that fans attending events or vendors and employees working at Braves events will not contract COVID-19 in the course of attending or providing services. Any such occurrence could result in litigation, legal and other costs, insufficient staff or supply to provide services and reputational risk that could materially and adversely impact SplitCo’s businesses and results of operations. Even after the COVID-19 pandemic subsides, the U.S. economy may experience a recession, and SplitCo anticipates its businesses and operations could be materially adversely affected.

Weak economic conditions may reduce consumer demand for products, services and events offered by SplitCo.

A weak economy as a result of inflation and any recession, could adversely affect demand for SplitCo’s products, services and events. A substantial portion of SplitCo’s revenue is derived from discretionary spending by individuals on tickets, including postseason games, concessions, merchandise, suites and premium seat fees, which typically falls during times of economic instability. In addition, weak economic conditions

 

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and reductions in discretionary spending may adversely impact the demand for products and services of SplitCo’s Development Project lessees which may weaken the financial condition of such lessees. As a result, such lessees may delay lease commencement, fail to make rental payments or become insolvent. See “—​Factors Relating to SplitCo’s Business — Negative market conditions or adverse events affecting existing or potential lessees of the Development Project or the industries in which they operate, could have an adverse impact on SplitCo’s ability to attract new lessees, re-lease space, collect rent or renew leases at the Development Project, which could adversely affect SplitCo’s cash flow from operations and inhibit growth.” Accordingly, the ability of SplitCo to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments decline. SplitCo is currently unable to predict the extent of any of these potential adverse effects.

Fans attending professional baseball games risk personal injury or accident, which could subject SplitCo to personal injury or other claims and could increase SplitCo’s expenses.

Personal injuries and accidents involving fans attending professional baseball games have occurred, and may in the future occur, which could subject SplitCo to claims and liabilities for personal injuries which could increase expenses. While SplitCo maintains insurance policies that provide coverage within limits that are sufficient, in management’s judgment, to protect SplitCo from material financial loss for personal injuries sustained by persons at its venues, there can be no assurance that such insurance will be adequate at all times and in all circumstances.

SplitCo may be adversely affected by the occurrence of extraordinary events, such as terrorist attacks.

The occurrence and threat of extraordinary events, such as terrorist attacks, intentional or unintentional mass-casualty incidents, natural disasters or similar events, may substantially decrease the attendance at professional baseball games, which may decrease SplitCo’s revenue or expose it to substantial liability.

While SplitCo constantly evaluates the security precautions for its events, no security measures can guarantee safety. Despite SplitCo’s best efforts, some occurrences or actions are difficult to foresee and adequately plan for, which could lead to fan, vendor and/or employee harm resulting in fines, penalties, legal costs and reputational risk that could materially and adversely impact SplitCo’s business and results of operations.

Poor weather may adversely affect attendance at professional baseball games.

Due to weather conditions, SplitCo may be required to cancel or reschedule one or more baseball games to another available day, which could increase its costs and could negatively impact attendance, as well as concession and merchandise sales, which could negatively impact SplitCo’s financial performance.

Data loss or other breaches of SplitCo’s network security could materially harm its business and results of operations.

Penetration of SplitCo’s network or other misappropriation or misuse of personal or sensitive information and data, including credit card information and other personally identifiable information, could subject it to increased costs, litigation, actions from governmental authorities, and financial or other liabilities. In addition, security breaches, incidents or the inability to protect information could lead to ticketing fraud and counterfeit tickets. Security breaches and incidents could also result in significant costs related to remediation efforts. Any of the foregoing could adversely affect SplitCo’s business, financial condition and results of operations.

Factors Relating to Ownership of SplitCo’s Common Stock and the Securities Market

It is not certain that an active trading market will develop or be sustained after the Split-Off, and following the Split-Off, SplitCo’s stock price may fluctuate significantly.

Although the Braves Group is currently a tracking stock of Liberty Media, there is currently no public market for the New BATRA, New BATRB and New BATRK as common stock of SplitCo which will be received in the Split-Off. Liberty Media cannot predict the prices at which New BATRA, New BATRB or

 

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New BATRK may trade after the Split-Off, the effect of the Split-Off on the trading prices of the Liberty Media common stock or whether the market value of the shares of SplitCo common stock after the Split-Off will be less than, equal to or greater than the market value of a share of the corresponding series of Liberty Media’s Liberty Braves common stock prior to the Split-Off.

The market price of SplitCo common stock may fluctuate significantly due to a number of factors (none of which can be guaranteed to occur), some of which may be beyond SplitCo’s control, including:

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actual or anticipated fluctuations in SplitCo’s operating results;

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changes in earnings estimated by securities analysts or SplitCo’s ability to meet those estimates;

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the operating and stock price performance of comparable companies; and

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domestic and foreign economic conditions.

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For as long as SplitCo is an emerging growth company, it will not be required to comply with certain reporting requirements, including disclosure about its executive compensation, that apply to other public companies.

SplitCo is classified as an “emerging growth company” under the JOBS Act. As a result, it has reduced Sarbanes-Oxley Act compliance requirements, as discussed elsewhere, for as long as it is an emerging growth company, which may be up to five full fiscal years. Unlike other public companies, SplitCo will not be required to, among other things, (i) comply with certain audit-related requirements that SplitCo would otherwise be subject to but for its status as an emerging growth company, (ii) provide certain disclosure regarding executive compensation required of larger public companies or (iii) hold nonbinding advisory votes on executive compensation.

To the extent that SplitCo relies on any of the exemptions available to emerging growth companies, you will receive less information about its executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find SplitCo’s common stock to be less attractive as a result, there may be a less active trading market for SplitCo’s common stock and its stock price may be more volatile.

If, following the Split-Off, SplitCo is unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or SplitCo’s internal control over financial reporting is not effective, the reliability of SplitCo’s financial statements may be questioned and SplitCo’s stock price may suffer.

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to complete a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, SplitCo will be required to document and test its internal control procedures, SplitCo’s management will be required to assess and issue a report concerning SplitCo’s internal control over financial reporting, and SplitCo’s independent auditors will be required to issue an attestation regarding its internal control over financial reporting. However, as an emerging growth company, SplitCo will not be required to have its independent auditors attest to the effectiveness of its internal control over financial reporting until SplitCo’s first annual report subsequent to ceasing to be an emerging growth company. As a result, SplitCo may not be required to have its independent auditors attest to the effectiveness of its internal control over financial reporting until as late as the annual report for the year ending [    ]. Although Liberty Media does not expect the annual costs to comply with Section 404 to be significant (based on Liberty Media’s preliminary assessments), the rules governing the standards that must be met for SplitCo’s management to assess its internal control over financial reporting are complex, subject to change, and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, SplitCo’s management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If SplitCo’s management cannot favorably assess the effectiveness of its internal control over financial reporting when it’s required to do so or SplitCo’s auditors identify material weaknesses in its internal control, investor confidence in SplitCo’s financial results may weaken, and SplitCo’s stock price may suffer.

 

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It may be difficult for a third party to acquire SplitCo, even if doing so may be beneficial to SplitCo stockholders.

Certain provisions of SplitCo’s restated charter and by-laws may discourage, delay or prevent a change in control of SplitCo that a stockholder may consider favorable. These provisions include the following:

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no person may own 10% or more of the number of outstanding shares of SplitCo common stock unless such person is expressly approved by MLB or qualifies as an exempt person (which is generally defined to include [           ]);

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authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to ten votes per share, a Series A that entitles the holders to one vote per share, and a Series C that, except as otherwise required by applicable law, entitles the holders to no voting rights;

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classifying SplitCo’s board of directors with staggered three-year terms, which may lengthen the time required to gain control of SplitCo’s board of directors;

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limiting who may call special meetings of stockholders;

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prohibiting stockholder action by written consent (subject to certain exceptions), thereby requiring stockholder action to be taken at a meeting of the stockholders;

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requiring stockholder approval by holders of at least 662∕3% of SplitCo’s voting power or the approval by at least 75% of SplitCo’s board of directors with respect to certain extraordinary matters, such as a merger or consolidation of SplitCo, a sale of all or substantially all of SplitCo’s assets or an amendment to SplitCo’s restated charter;

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establishing advance notice requirements for nominations of candidates for election to SplitCo’s board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and

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the existence of authorized and unissued stock, including “blank check” preferred stock, which could be issued by SplitCo’s board of directors to persons friendly to its then current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of SplitCo.

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SplitCo’s stockholders will have different rights and privileges under Nevada law than under Delaware law and case law in Nevada may be less predictable than in Delaware.

SplitCo is a Nevada corporation and the application of Nevada law to holders of SplitCo common stock will differ in certain material respects from the application of Delaware law to holders of Liberty Braves common stock. Therefore, following the Split-Off, SplitCo stockholders will have different rights and privileges under Nevada law than holders of Liberty Braves common stock under Delaware law. See “— Directors and officers of SplitCo are protected from liability for a broad range of actions” and “— The holders of any series of SplitCo common stock, or the holders of SplitCo common stock as a whole, may not have any remedies if an action by its directors or officers prioritizes other interests or has a disparate effect on SplitCo common stock or any series thereof” below as well as “Description of SplitCo Capital Stock and Comparison of Stockholder Rights” below.

Because of Delaware’s prominence as a state of incorporation for many large corporations, the Delaware courts have developed considerable expertise in dealing with corporate issues and a substantial body of case law has developed construing Delaware law. While Nevada also has adopted comprehensive, modern and flexible corporate law statutes, because Nevada case law concerning the effects of its statutes and regulations is more limited, SplitCo and its stockholders may experience less predictability with respect to legality of corporate affairs and transactions and stockholders’ rights to challenge them in situations where the application of the statute may be unclear.

Directors and officers of SplitCo are protected from liability for a broad range of actions.

Delaware law permits limiting or eliminating the monetary liability of a director and, subject to certain limitations set forth in the DGCL, certain officers, to a corporation or its stockholders, except with regard

 

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to breaches of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, in the case of directors, unlawful payment of dividends or unlawful stock purchase or redemption, any transaction from which a director or officer derived an improper personal benefit, or, in the case of officers, any action by or in the right of the corporation. Nevada law has a similar, but somewhat broader provision limiting or eliminating the individual liability of both directors and officers unless the articles of incorporation provide for greater liability. A director or officer of a Nevada corporation is not liable unless the presumption that such person acted in good faith, on an informed basis and with a view to the interests of the corporation has been rebutted. In addition, there must be proof both that the act or failure to act constituted a breach of a fiduciary duty as a director or officer and that such breach involved intentional misconduct, fraud or a knowing violation of law, a more stringent burden than a breach of the duty of loyalty or deriving an improper personal benefit under the Delaware statute. In addition, the Nevada provision permitting limitation of liability applies to both directors and officers and expressly applies to liabilities owed to creditors of the corporation.

The SplitCo restated charter includes restrictions on the share ownership of SplitCo common stock by certain persons, which if triggered would result in an immediate transfer of the applicable number of shares to a trust for the benefit of the holder.

To comply with the MLB Rules and Regulations, the SplitCo restated charter provides that (i) employees of MLB and related entities may not own SplitCo common stock, (ii) persons who are employed by or otherwise associated with an MLB Club other than the Braves may not own 5% or more of the number of outstanding shares of SplitCo common stock, and (iii) no person may own 10% or more of the number of outstanding shares of SplitCo common stock unless, in the case of this clause (iii), such person is expressly approved by MLB or qualifies as an exempt person (which is generally defined to include [           ]). In the event that a holder attempts to acquire shares of SplitCo common stock in violation of this charter provision, the applicable shares will automatically be transferred to a trust which will sell the shares for the benefit of the holder (subject to certain exceptions, such as in the event of an inadvertent violation of the restrictions described in clause (ii) or (iii) above which is cured within the applicable time frame). No assurance can be given that the trust will be able to sell the shares at a price that is equal to or greater than the price paid by the holder. In addition, the holder’s right to receive the net proceeds of the sale, as well as any dividends or other distributions to which the holder would otherwise be entitled, will be subject to the holder’s compliance with the applicable mechanics included in the SplitCo restated charter.

The holders of any series of SplitCo common stock, or the holders of SplitCo common stock as a whole, may not have any remedies if an action by its directors or officers prioritizes other interests or has a disparate effect on SplitCo common stock or any series thereof.

Principles of Nevada law and the provisions of SplitCo’s restated charter may protect decisions of its board of directors that weigh interests different from those of the holders of SplitCo’s common stock, or any series thereof, or that have a disparate impact upon holders of any series of SplitCo common stock. Under Nevada law, the board of directors has the duty to exercise its powers in good faith and with a view to the interests of the corporation. In doing so, the board of directors may consider all relevant facts, circumstances, contingencies or constituencies, including, without limitation, the interests of the corporation’s employees, suppliers, creditors or customers; the economy of the state or the nation; the interests of the community or of society; the long-term or short-term interests of the corporation, including the possibility that these interests may be best served by the continued independence of the corporation; or the long-term or short-term interests of the corporation’s stockholders, including the possibility that these interests may be best served by the continued independence of the corporation. Directors may consider or assign weight to the interests of any particular person or group, or to any other relevant facts, circumstances, contingencies or constituencies and are not required to consider, as a dominant factor, the effect of a proposed corporate action upon any particular group or constituency having an interest in the corporation. Under the principles of Nevada law referred to above and the business judgment rule, you may not be successful in challenging these decisions if a majority of SplitCo’s board of directors is disinterested, independent and adequately informed with respect to decisions of the board and acts in good faith and in the honest belief that the board is acting in the best interests of all of SplitCo’s stockholders.

 

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Although New BATRB is expected to be quoted on the OTC Markets, there is no meaningful trading market expected for the stock.

The shares of New BATRB are not widely held, with approximately [    ]% of the outstanding shares of New BATRB immediately following the Split-Off expected to be beneficially owned by Mr. Malone (based on [     ] shares of BATRB outstanding as of [    ]). Although New BATRB is expected to be quoted on the OTC Markets, it is expected to be sparsely traded and will not have an active trading market. The OTC Markets tend to be highly illiquid, in part, because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make markets in particular stocks. There is also a greater chance of market volatility for securities that trade on the OTC Markets as opposed to a national exchange or quotation system. This volatility is due to a variety of factors, including a lack of readily available price quotations, lower trading volume, absence of consistent administrative supervision of “bid” and “ask” quotations, and market conditions. Each share of New BATRB is convertible, at any time at the option of the holder, into one share of New BATRA, which is expected to be listed and traded on the Nasdaq Global Select Market under the symbol “BATRA.”

Factors Relating to the Reclassification

Risks Related to the Reclassification and to Liberty Media’s Tracking Stock Capitalization

Liberty Media may not realize the potential benefits from the Reclassification in the near term or at all.

Liberty Media anticipates the realization of strategic and financial benefits as a result of the Reclassification. See “The Proposed Transactions — Reasons for the Split-Off and the Reclassification.” In particular, Liberty Media’s board of directors believes that the Reclassification will provide greater operational and financial flexibility in executing its business strategies by permitting Liberty Media to bring greater clarity to the businesses and assets currently attributed to the Liberty SiriusXM Group and the Formula One Group thereby allowing the New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock to move more in line with the fundamentals of the more focused businesses and assets attributed to the New Liberty SiriusXM Group, New Formula One Group and Liberty Live Group, respectively. Liberty Media expects the Reclassification to lead to greater market recognition and more accurate valuation and to facilitate strategic acquisitions by Liberty Media. The Reclassification will also offer greater choice by investors while maintaining the advantages of doing business under common ownership. In addition, the refinement of Liberty Media’s businesses, assets and liabilities into the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group will enable Liberty Media to more effectively tailor management and employee incentives. The terms of the Liberty Media restated charter will preserve the ability of its board of directors to unwind the tracking stock capitalization while retaining future restructuring flexibility by preserving its ability to undertake future asset segmentation and capital restructurings.

The illustrative historical attributed financial information of the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group included in this joint proxy statement/prospectus may not necessarily reflect their results had the Reclassification occurred on the assumed dates or had they been separate companies.

One of the reasons for the creation of a tracking stock is to permit equity investors to apply more specific criteria in valuing the shares of a particular group, such as comparisons of earnings multiples with those of other companies in the same business sector. In valuing shares of the New Liberty SiriusXM common stock, New Liberty Formula One common stock and the Liberty Live common stock, investors should recognize that the illustrative historical attributed financial information of the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group has been extracted from Liberty Media’s consolidated financial statements and assumes that the Reclassification occurred on January 1, 2020 and are based on assumptions that Liberty Media believes are reasonable, but may not necessarily reflect what the New Liberty SiriusXM Group’s, the New Formula One Group’s and the Liberty Live Group’s results of operations, financial condition and cash flows would have been had the Reclassification occurred on such

 

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earlier dates or had each of these groups been separate, stand-alone entities pursuing independent strategies during the periods presented.

Following the Reclassification, holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will be common stockholders of Liberty Media and, therefore, are subject to risks associated with an investment in Liberty Media as a whole, even if a holder does not own shares of common stock of all of Liberty Media’s groups.

Even though Liberty Media has attributed, for financial reporting purposes, all of Liberty Media’s consolidated assets, liabilities, revenue, expenses and cash flows among the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group in order to prepare the separate financial statement schedules included in this joint proxy statement/prospectus for each of those groups, Liberty Media will retain legal title to all of Liberty Media’s assets and Liberty Media’s tracking stock capitalization will not limit Liberty Media’s legal responsibility, or that of Liberty Media’s subsidiaries, for the liabilities included in any set of financial statement schedules. Holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will not have any legal rights related to specific assets attributed to their associated group and, in any liquidation, holders of New Liberty SiriusXM common stock, holders of New Liberty Formula One common stock and holders of Liberty Live common stock will be entitled to receive a proportionate share of Liberty Media’s available net assets based on their respective number of liquidation units. See “Description of Liberty Media Capital Stock and Comparison of Stockholder Rights.”

Possible market confusion may result from holders of Liberty Media’s tracking stocks mistakenly believing that (i) they directly own stock of a company that is attributed to one of Liberty Media’s tracking stocks, (ii) they have any equity or voting interests with respect to companies attributed to one of Liberty Media’s tracking stocks and (iii) companies attributed to one of Liberty Media’s tracking stocks have any obligation with respect to Liberty Media’s indebtedness or other obligations.

Liberty Media holds interests in various companies, including public companies, and these interests are attributed to its tracking stock groups. In particular, after the Reclassification, the assets of the New Liberty SiriusXM Group will include Liberty Media’s ownership interest in Sirius XM Holdings and the assets of the Liberty Live Group will include Liberty Media’s ownership interest in Live Nation. Similarly, the New Formula One Group will include Liberty Media’s subsidiary that owns the Formula 1 business. Depending on the composition of the assets underlying Liberty Media’s tracking stock groups from time to time, confusion in the marketplace may occur if holders of Liberty Media’s tracking stock mistakenly believe they own stock of a company attributed to the applicable tracking stock group. This may especially be true in cases where a tracking stock group has a name that is similar to the publicly traded company attributed to the applicable tracking stock group, as is the case of (i) the New Liberty SiriusXM Group and Sirius XM Holdings and (ii) the Liberty Live Group and Live Nation. As described above, holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock do not have any legal rights related to specific assets attributed to their associated tracking stock group. Similarly, holders of these tracking stocks do not, by virtue of their ownership of Liberty Media tracking stock, own any equity or voting interest in any company attributed to one of Liberty Media’s tracking stock groups, including any public companies. Furthermore, Liberty Media is a holding company and its ability to meet its financial obligations, including its payment obligations under its indebtedness, is dependent upon its available cash balances, dividends and interest from its investments, monetization of its public investment portfolio and proceeds from any asset sales. Liberty Media’s ability to receive dividends or payments or advances from its businesses depends on their individual operating results, any statutory, regulatory or contractual restrictions to which they may be or may become subject and the terms of their own indebtedness, including Sirius XM’s senior notes and credit facility and Formula 1’s subsidiary debt. Liberty Media generally does not receive cash, in the form of dividends (other than dividends generally payable to Sirius XM stockholders pursuant to Sirius XM’s dividend policy), loans, advances or otherwise, from any of its subsidiaries or business affiliates. Liberty Media’s subsidiaries and business affiliates are separate and distinct legal entities and they have no obligation, contingent or otherwise, to pay or to make any funds available for payment of Liberty Media’s indebtedness or other obligations.

 

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Liberty Media may split off, spin off or reattribute assets, liabilities and businesses attributed to its tracking stock groups in a manner that may disparately impact some of Liberty Media’s stockholders if its board of directors determines such transaction to be in the best interest of all of Liberty Media’s stockholders, and in some cases, not all of Liberty Media’s stockholders would be entitled to vote on such a transaction.

Pursuant to the terms of the Liberty Media restated charter, Liberty Media’s board of directors may determine that it is in the best interest of all of Liberty Media’s stockholders to effect a redemptive split-off whereby all or a portion of the outstanding shares of a particular tracking stock would be redeemed for shares of common stock of a subsidiary (the Split-Off Subsidiary) that holds all or a portion of the assets and liabilities attributed to such tracking stock group subject to the approval of only the holders of the tracking stock to be redeemed. However, the vote of holders of Liberty Media’s other tracking stocks would not be required, unless the Split-Off Subsidiary also held assets and liabilities of such other tracking stock group(s). If Liberty Media were to effect a redemptive split-off, then, pursuant to the terms of the Liberty Media restated charter, Liberty Media would be required to redeem the outstanding shares of the affected tracking stock from its holders on an equal per share basis (i.e., it could not redeem shares from holders of only certain series of the affected tracking stock or redeem from all holders of the affected tracking stock on a non-pro rata basis). Following a redemptive split-off, holders of the other tracking stock(s) would continue to hold stock tracking the performance of Liberty Media’s remaining assets and liabilities which would not have changed after the redemptive split-off, unless a reattribution among the tracking stocks occurred in connection with the redemptive split-off (as discussed below). In addition, in the case of a partial redemptive split-off, holders of the affected tracking stock would hold shares of the Split-Off Subsidiary and continue to hold a reduced number of shares of the affected tracking stock which would track the remaining assets and liabilities retained by Liberty Media and attributed to such tracking stock after the split-off.

Liberty Media is also permitted, pursuant to the terms of the Liberty Media restated charter, to effect a spin-off of certain of its assets and liabilities through the dividend of shares of a subsidiary holding such assets and liabilities, and the spin-off would not be subject to prior stockholder approval. In this situation, a tracking stockholder would retain their tracking stock shares and receive shares of the spun-off entity.

Furthermore, in structuring these transactions, Liberty Media’s board of directors may determine to alter the composition of the assets and liabilities underlying its tracking stock groups through a reattribution. As contemplated by both the Liberty Media restated charter and Liberty Media’s management and allocation policies designed to assist it in managing and separately presenting the businesses and operations attributed to its tracking stock groups, Liberty Media’s board of directors is vested with the discretion to reattribute assets and liabilities from one tracking stock group to another tracking stock group without the approval of any of its stockholders, and the only limitations on its exercise of such discretion are that the reattribution be in the best interest of all of Liberty Media’s stockholders and that the reattribution be done on a fair value basis. Holders of the affected tracking stock groups will not be entitled to a separate vote to approve a reattribution, even if such reattribution is occurring in connection with a redemptive split-off and such stockholders would otherwise be entitled to vote on the redemptive split-off itself.

The Liberty Media board of directors’ ability to reattribute businesses, assets and expenses between and among tracking stock groups may make it difficult to assess the future prospects of Liberty Media’s tracking stock groups based on past performance.

The Liberty Media board of directors is vested with discretion to reattribute businesses, assets and liabilities that are attributed to one tracking stock group to another tracking stock group, without the approval of any of Liberty Media’s stockholders. See “The Reclassification Proposals — Management and Allocation Policies.” Any such reattribution made by Liberty Media’s board, as well as the existence, in and of itself, of the right to effect a reattribution may impact the ability of investors to assess the future prospects of the businesses and assets attributed to a tracking stock group, including liquidity and capital resource needs, based on past performance. Stockholders may also have difficulty evaluating the liquidity and capital resources of the businesses and assets attributed to each group based on past performance, as Liberty Media’s board of directors may use one group’s liquidity to fund another group’s liquidity and capital expenditure requirements through the use of inter-group loans and inter-group interests.

 

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Liberty Media could be required to use assets attributed to one group to pay liabilities attributed to another group.

The assets attributed to one group are potentially subject to the liabilities attributed to another group, even if those liabilities arise from lawsuits, contracts or indebtedness that are attributed to such other group. While Liberty Media’s current management and allocation policies provide that reattributions of assets between groups will result in the creation of an inter-group loan or an inter-group interest or an offsetting reattribution of cash or other assets, no provision of the Liberty Media restated charter prevents Liberty Media from satisfying liabilities of one group with assets of another group, and Liberty Media’s creditors will not in any way be limited by Liberty Media’s tracking stock capitalization from proceeding against any assets they could have proceeded against if Liberty Media did not have a tracking stock capitalization.

The market price of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock may not reflect the performance of the businesses and assets attributed to the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group, respectively, as Liberty Media intends.

Liberty Media cannot assure you that the market price of the common stock related to a group will, in fact, reflect the performance of the group of businesses, assets and liabilities attributed to that group. Holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will be common stockholders of Liberty Media as a whole and, as such, will be subject to all risks associated with an investment in Liberty Media and all of Liberty Media’s businesses, assets and liabilities. As a result, the market price of each tracking stock may, in part, reflect events that are intended to be reflected or tracked by a different tracking stock of Liberty Media. In addition, investors may discount the value of the stock related to a group because it is part of a common enterprise rather than a stand-alone entity.

The market price of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock may be volatile, could fluctuate substantially and could be affected by factors that do not affect traditional common stock.

Liberty Media does not know how the market will react to the Reclassification. In addition, to the extent the market prices of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock track the performance of more focused groups of businesses, assets and liabilities than Liberty Media’s existing common stock does, the market prices of these updated tracking stocks may be more volatile than the market prices of Liberty Media’s existing tracking stock groups have been historically. The market prices of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock may be materially affected by, among other things:

•

actual or anticipated fluctuations in a group’s operating results or in the operating results of particular companies attributable to such group;

​

•

potential acquisition activity by Liberty Media (regardless of the group to which it is attributed) or the companies in which Liberty Media invests;

​

•

issuances of debt or equity securities to raise capital by Liberty Media or the companies in which Liberty Media invests and the manner in which that debt or the proceeds of an equity issuance are attributed to each of the groups;

​

•

changes in financial estimates by securities analysts regarding New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock or the companies attributable to Liberty Media’s tracking stock groups;

​

•

the complex nature and the potential difficulties investors may have in understanding the terms of Liberty Media’s three updated tracking stocks, as well as concerns regarding the possible effect of certain of those terms on an investment in Liberty Media’s common stock; and

​

•

general market conditions.

​

Liberty Media cannot assure you that the combined market value of the shares of New Liberty SiriusXM common stock and Liberty Live common stock that you receive in the Reclassification for one

 

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share of Liberty SiriusXM common stock, or the shares of New Liberty Formula One common stock and Liberty Live common stock that you receive in the Reclassification for one share of Liberty Formula One common stock, will equal or exceed the current market value of a share of Liberty SiriusXM common stock or Liberty Formula One common stock, respectively. In addition, until an orderly trading market develops for the New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock following the Reclassification, the trading prices of those stocks may fluctuate significantly.

The market value of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock could be adversely affected by events involving the assets and businesses attributed to one or more of the other groups.

Because Liberty Media will be the issuer of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock, an adverse market reaction to events relating to the assets and businesses attributed to one of Liberty Media’s groups, such as earnings announcements or announcements of new products or services or acquisitions or dispositions that the market does not view favorably, may cause an adverse market reaction in the common stock of the other groups. This could occur even if the triggering event is not material to Liberty Media as a whole. Certain events may also have a greater impact on one group than the same triggering event would have on another group due to the asset composition of the affected group. In addition, the incurrence of significant indebtedness by Liberty Media or any of Liberty Media’s subsidiaries on behalf of one group, including indebtedness incurred or assumed in connection with acquisitions of or investments in businesses, could affect Liberty Media’s subsidiaries’ credit ratings and, therefore, could increase the borrowing costs of businesses attributable to Liberty Media’s other groups or the borrowing costs of Liberty Media as a whole.

Liberty Media may not pay dividends equally or at all on New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock.

Liberty Media does not presently intend to pay cash dividends on New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock for the foreseeable future. However, Liberty Media will have the right to pay dividends on the shares of common stock related to each group in equal or unequal amounts, and Liberty Media may pay dividends on the shares of common stock related to one group and not pay dividends on shares of common stock related to another group. In addition, any dividends or distributions on, or repurchases of, shares relating to a group will reduce Liberty Media’s assets legally available to be paid as dividends on the shares relating to another group.

Liberty Media’s tracking stock capital structure could create conflicts of interest, and Liberty Media’s board of directors may make decisions that could adversely affect only some holders of Liberty Media’s common stock.

Liberty Media’s tracking stock capital structure could give rise to occasions when the interests of holders of stock related to one group might diverge or appear to diverge from the interests of holders of stock related to one or both of the other groups. In addition, given the nature of their businesses, there may be inherent conflicts of interests between the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group. Liberty Media’s tracking stock groups are not separate entities and thus holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will not have the right to elect separate boards of directors. As a result, Liberty Media’s officers and directors owe fiduciary duties to Liberty Media as a whole and all of Liberty Media’s stockholders as opposed to only holders of a particular group. Decisions deemed to be in the best interest of Liberty Media and all of Liberty Media’s stockholders may not be in the best interest of a particular group or groups when considered independently. Examples include:

•

decisions as to the terms of any business relationships that may be created between groups, such as between the New Liberty SiriusXM Group and the New Formula One Group or between the New Liberty SiriusXM Group and the Liberty Live Group;

​

•

the terms of any reattributions of assets between one or more groups;

​

 

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•

decisions as to the allocation of consideration among the holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock, or among the series of stocks relating to Liberty Media’s groups, to be received in connection with a merger involving Liberty Media;

​

•

decisions as to the allocation of corporate opportunities between the groups, especially where the opportunities might meet the strategic business objectives of more than one group;

​

•

decisions as to operational and financial matters that could be considered detrimental to one or more groups but beneficial to another;

​

•

decisions as to the conversion of shares of common stock of one group into shares of common stock of another;

​

•

decisions regarding the creation of, and, if created, the subsequent increase or decrease of any inter-group interest that one group may own in another group;

​

•

decisions as to the internal or external financing attributable to businesses or assets attributed to any of Liberty Media’s groups;

​

•

decisions as to the dispositions of assets of any of Liberty Media’s groups; and

​

•

decisions as to the payment of dividends on the stock relating to any of Liberty Media’s groups.

​

Liberty Media’s directors’ or officers’ equity ownership may create or appear to create conflicts of interest.

If directors or officers own disproportionate interests (in percentage or value terms) in New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock, that disparity could create or appear to create conflicts of interest when they are faced with decisions that could have different implications for the holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock.

Other than pursuant to the management and allocation policies described in this joint proxy statement/​prospectus, Liberty Media has not adopted any specific procedures for consideration of matters involving a divergence of interests among holders of shares of stock relating to Liberty Media’s three groups, or among holders of different series of stock relating to a specific group.

Rather than develop additional specific procedures in advance, Liberty Media’s board of directors intends to exercise its judgment from time to time, depending on the circumstances, as to how best to:

•

obtain information regarding the divergence (or potential divergence) of interests;

​

•

determine under what circumstances to seek the assistance of outside advisers;

​

•

determine whether a committee of Liberty Media’s board of directors should be appointed to address a specific matter and the appropriate members of that committee; and

​

•

assess what is in Liberty Media’s best interests and the best interests of all of Liberty Media’s stockholders.

​

Liberty Media’s board of directors believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweighs any perceived advantages of adopting additional specific procedures in advance. See “The Reclassification Proposals — Management and Allocation Policies.”

Liberty Media’s board of directors may change the management and allocation policies to the detriment of one or more groups without stockholder approval.

Following the Reclassification, Liberty Media will implement the management and allocation policies described in this joint proxy statement/prospectus to serve as guidelines in making decisions regarding the relationships among the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group with respect to matters such as tax liabilities and benefits, inter-group loans, inter-group interests,

 

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attribution of assets, financing alternatives, corporate opportunities and similar items. These policies are expected to set forth the initial focuses and strategies of these groups and the initial attribution of Liberty Media’s businesses, assets and liabilities among them in connection with the Reclassification. See “The Reclassification Proposals — Management and Allocation Policies.” These policies are not and will not be included in the Liberty Media restated charter. Liberty Media’s board of directors may at any time change or make exceptions to these policies. Because these policies relate to matters concerning the day-to-day management of Liberty Media as opposed to significant corporate actions, such as a merger involving Liberty Media or a sale of substantially all of Liberty Media’s assets, no stockholder approval was required with respect to their adoption or amendment. A decision to change, or make exceptions to, these policies or adopt additional policies could disadvantage one or more groups while advantaging the other(s).

Holders of shares of stock relating to a particular group may not have any remedies if any action by Liberty Media’s directors or officers has an adverse effect on only that stock, or on a particular series of that stock.

Principles of Delaware law and the provisions of the Liberty Media restated charter may protect decisions of Liberty Media’s board of directors that have a disparate impact upon holders of shares of stock relating to a particular group, or upon holders of any series of stock relating to a particular group. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of Liberty Media’s stockholders, regardless of the stock, or series, they hold. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all stockholders and does not have separate or additional duties to any subset of stockholders. Judicial opinions in Delaware involving tracking stocks have established that decisions by directors or officers involving differing treatment of holders of tracking stocks may be judged under the business judgment rule. In some circumstances, Liberty Media’s directors or officers may be required to make a decision that is viewed as adverse to the holders of shares relating to a particular group or to the holders of a particular series of that stock. Under the principles of Delaware law and the business judgment rule referred to above, you may not be able to successfully challenge decisions that you believe have a disparate impact upon the stockholders of one of Liberty Media’s groups if a majority of Liberty Media’s board of directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of Liberty Media and all of Liberty Media’s stockholders.

Stockholders will not vote on how to attribute consideration received in connection with a merger involving Liberty Media among holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock.

The Liberty Media restated charter does not contain any provisions governing how consideration received in connection with a merger or consolidation involving Liberty Media is to be attributed to the holders of New Liberty SiriusXM common stock, holders of New Liberty Formula One common stock and holders of Liberty Live common stock or to the holders of different series of stock, and none of the holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock will have a separate class vote in the event of such a merger or consolidation. Consistent with applicable principles of Delaware law, Liberty Media’s board of directors will seek to divide the type and amount of consideration received in a merger or consolidation involving Liberty Media among holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock in a fair manner. As the different ways the board of directors may divide the consideration between holders of stock relating to the different groups, and among holders of different series of a particular stock, might have materially different results, the consideration to be received by holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock in any such merger or consolidation may be materially less valuable than the consideration they would have received if they had a separate class vote on such merger or consolidation.

Liberty Media may dispose of assets of the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group without your approval.

Delaware law requires stockholder approval only for a sale or other disposition of all or substantially all of the assets of Liberty Media taken as a whole, and the Liberty Media restated charter does not require

 

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a separate class vote in the case of a sale of a significant amount of assets of any of Liberty Media’s groups. As long as the assets attributed to the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group proposed to be disposed of represent less than substantially all of Liberty Media’s assets, Liberty Media may approve sales and other dispositions of any amount of the assets of such group without any stockholder approval.

If Liberty Media disposes of all or substantially all of the assets attributed to any group (which means, for this purpose, assets representing 80% of the fair market value of the total assets of the disposing group, as determined by Liberty Media’s board of directors), Liberty Media would be required under the terms of the Liberty Media restated charter, if the disposition is not an exempt disposition under the terms of the Liberty Media restated charter, to choose one or more of the following three alternatives:

•

declare and pay a dividend on the disposing group’s common stock;

​

•

redeem shares of the disposing group’s common stock in exchange for cash, securities or other property; and/or

​

•

convert all or a portion of the disposing group’s outstanding common stock into common stock of another group.

​

See “Description of Liberty Media Capital Stock and Comparison of Stockholder Rights.”

In this type of a transaction, holders of the disposing group’s common stock may receive less value than the value that a third-party buyer might pay for all or substantially all of the assets of the disposing group.

Liberty Media’s board of directors will decide, in its sole discretion, how to proceed and is not required to select the option that would result in the highest value to holders of any stock related to a particular group.

Holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock may receive less consideration upon a sale of the assets attributed to that group than if that group were a separate company.

If any of the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group were a separate, independent company and its shares were acquired by another person, certain costs of that sale, including corporate level taxes, might not be payable in connection with that acquisition. As a result, stockholders of a separate, independent company with the same assets might receive a greater amount of proceeds than the holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock would receive upon a sale of all or substantially all of the assets of the group to which their shares relate. In addition, Liberty Media cannot assure you that in the event of such a sale the per share consideration to be paid to holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock, as the case may be, will be equal to or more than the per share value of that share of stock prior to or after the announcement of a sale of all or substantially all of the assets of the applicable group. Further, there is no requirement that the consideration paid be tax-free to the holders of the shares of common stock related to that group. Accordingly, if Liberty Media sells all or substantially all of the assets attributed to the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group, Liberty Media’s stockholders could suffer a loss in the value of their investment in Liberty Media’s common stock.

In the event of a liquidation of Liberty Media, holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will not have a priority with respect to the assets attributed to the related tracking stock group remaining for distribution to stockholders.

Under the Liberty Media restated charter, upon Liberty Media’s liquidation, dissolution or winding up, holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will be entitled to receive, in respect of their shares of such stock, an interest in all of Liberty Media’s assets, if any, remaining for distribution to holders of common stock in proportion to their respective number of “liquidation units” per share. As of the record date, each share of Liberty SiriusXM common stock was attributed [           ] of a liquidation unit and each share of Liberty Formula

 

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One common stock was attributed [      ] of a liquidation unit. Pursuant to the Reclassification, the fraction of a liquidation unit attributable to the Liberty SiriusXM common stock will be allocated between the New Liberty SiriusXM common stock and the Liberty Live common stock, and the fraction of a liquidation unit attributable to the Liberty Formula One common stock will be allocated between New Liberty Formula One common stock and Liberty Live common stock, in each case, as set forth in “Description of Liberty Media Capital Stock and Comparison of Stockholder Rights.” Hence, the assets to be distributed to a holder of tracking stock upon a liquidation, dissolution or winding up of Liberty Media will have nothing to do with the value of the assets attributed to the related tracking stock group or to changes in the relative value of the New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock over time.

Liberty Media’s board of directors may, in its sole discretion, elect to convert the common stock relating to one group into common stock relating to another group, thereby changing the nature of your investment and possibly diluting your economic interest in Liberty Media, which could result in a loss in value to you.

The Liberty Media restated charter will permit Liberty Media’s board of directors, in its sole discretion, to convert all of the outstanding shares of common stock relating to any of Liberty Media’s groups into shares of common stock of another group on terms described in paragraphs (b)(ii)-(vii) of Article IV, Section A.2 of the Liberty Media restated charter included in this joint proxy statement/prospectus as Annex C. A conversion would preclude the holders of stock related to each group involved in such conversion from retaining their investment in a security that is intended to reflect separately the performance of the relevant group. Liberty Media cannot predict the impact on the market value of Liberty Media’s common stock of (1) Liberty Media’s board of directors’ ability to effect any such conversion or (2) the exercise of this conversion right by Liberty Media’s board. In addition, Liberty Media’s board of directors may effect such a conversion at a time when the market value of Liberty Media’s different stocks could cause the stockholders of one group to be disadvantaged.

Holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock will vote together and will have limited separate voting rights.

Holders of New LSXMA and New LSXMB, New FWONA and New FWONB and LLYVA and LLYVB will vote together as a single class, except in certain limited circumstances prescribed by the Liberty Media restated charter and under Delaware law. Each share of Series B common stock of each group will have ten votes per share, and each share of Series A common stock of each group will have one vote per share. Holders of Series C common stock of each group will have no voting rights, other than those required under Delaware law. When holders of New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock vote together as a single class, holders having a majority of the votes will be in a position to control the outcome of the vote even if the matter involves a conflict of interest among Liberty Media’s stockholders or has a greater impact on one group than another.

Transactions in New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock by Liberty Media’s insiders could depress the market price of those stocks.

Sales of, or hedging transactions such as collars relating to, shares of New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock by Liberty Media’s Chairman of the Board, or any of Liberty Media’s other directors or executive officers, could cause a perception in the marketplace that the stock price of the relevant shares has peaked or that adverse events or trends have occurred or may be occurring at Liberty Media or the group to which the shares relates. This perception can result notwithstanding any personal financial motivation for these transactions. As a result, insider transactions could depress the market price for shares of the New Liberty SiriusXM common stock, New Liberty Formula One common stock or Liberty Live common stock.

 

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Liberty Media’s capital structure, as well as the fact that the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group are not independent companies, may inhibit or prevent acquisition bids for the businesses attributed to the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group and may make it difficult for a third party to acquire Liberty Media, even if doing so may be beneficial to Liberty Media’s stockholders.

If the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group were separate independent companies, any person interested in acquiring the New Liberty SiriusXM Group, the New Formula One Group or the Liberty Live Group without negotiating with management could seek control of that group by obtaining control of its outstanding voting stock, by means of a tender offer or a proxy contest. Although Liberty Media intends the New Liberty SiriusXM common stock, New Liberty Formula One common stock and Liberty Live common stock to reflect the separate economic performance of the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group, respectively, those groups are not separate entities and a person interested in acquiring only one group without negotiation with Liberty Media’s management could obtain control of that group only by obtaining control of a majority in voting power of all of the outstanding voting shares of Liberty Media. The existence of shares of common stock, and different series of shares, relating to different groups could present complexities and in certain circumstances pose obstacles, financial and otherwise, to an acquiring person that are not present in companies that do not have a capital structure similar to that of Liberty Media.

Certain provisions of the Liberty Media restated charter and bylaws may discourage, delay or prevent a change in control of Liberty Media that a stockholder may consider favorable. These provisions include:

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authorizing a capital structure with multiple series of common stock: a Series B common stock related to each group that entitles the holders to ten votes per share, a Series A common stock related to each group that entitles the holder to one vote per share, and a Series C common stock related to each group that, except as otherwise required by Delaware law, entitles the holder to no voting rights;

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classifying Liberty Media’s board of directors with staggered three-year terms, which may lengthen the time required to gain control of Liberty Media’s board of directors;

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limiting who may call special meetings of stockholders;

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prohibiting stockholder action by written consent, thereby requiring all stockholder action to be taken at a meeting of the stockholders;

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establishing advance notice requirements for nominations of candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

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requiring stockholder approval by holders of at least 662∕3% of Liberty Media’s aggregate voting power or the approval by at least 75% of Liberty Media’s board of directors with respect to certain extraordinary matters, such as a merger or consolidation of Liberty Media, a sale of all or substantially all of Liberty Media’s assets or an amendment to the Liberty Media restated charter; and

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the existence of authorized and unissued stock, including “blank check” preferred stock, which could be issued by Liberty Media’s board of directors to persons friendly to its then current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of Liberty Media.

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Immediately following the Reclassification, Liberty Media’s chairman, Mr. Malone, is expected to beneficially own shares (based on Mr. Malone’s beneficial ownership of Liberty SiriusXM common stock and Liberty Formula One common stock and outstanding share information, in each case, as of [      ]) representing the power to direct approximately [      ]% of the aggregate voting power in Liberty Media, due to his beneficial ownership of approximately [     ]% of the outstanding shares of LSXMB and approximately [     ]% of the outstanding shares of FWONB as of [      ]).

The Reclassification could result in significant tax liability.

The Reclassification is conditioned upon the receipt by Liberty Media of the opinion of Skadden Arps, tax counsel to Liberty Media, to the effect that, among other things, the Reclassification will qualify as a tax-free reorganization under Section 368(a) and related provisions of the Code to Liberty Media and to

 

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holders of Liberty SiriusXM common stock and Liberty Formula One common stock (except with respect to the receipt of any cash in lieu of fractional shares). Opinions of counsel are not binding on the IRS or the courts, and there can be no assurance that the IRS will not challenge the conclusions reached in such opinion or that a court would not sustain such a challenge. In addition, there are no Code provisions, U.S. Treasury Regulations, court decisions, or published rulings of the IRS directly addressing the characterization of stock with characteristics similar to the Liberty SiriusXM common stock, Liberty Formula One common stock, New Liberty SiriusXM common stock, New Liberty Formula One common stock, and Liberty Live common stock. The IRS has also announced that it will not issue rulings on the characterization of tracking stock. Therefore, the tax treatment of the Reclassification is not entirely certain. If the IRS were to successfully assert that the Reclassification does not qualify as a tax-free reorganization, Liberty Media and holders of Liberty SiriusXM common stock and Liberty Formula One common stock could incur significant tax liabilities. For a more complete discussion of the tax opinion and the tax consequences if the Reclassification is not tax-free, please see “U.S. Federal Income Tax Consequences — Tax Opinions and — U.S. Federal Income Tax Consequences of the Reclassification.”

In addition, due to the absence of authorities relating directly to the characterization of tracking stock under Section 306 of the Code, there is also a risk that the IRS could successfully assert that the New Liberty SiriusXM common stock, New Liberty Formula One common stock and/or Liberty Live common stock is “Section 306 stock,” within the meaning of Section 306(c) of the Code. If any of Liberty Media’s stock were determined to be Section 306 stock, a holder of such stock could be required to recognize ordinary income on the subsequent sale or exchange of such stock, or dividend income on any redemption of such stock, in each case without regard to such holder’s basis in such stock, and generally would not be permitted to recognize any loss on such disposition, as described in more detail below under “U.S. Federal Income Tax Consequences — U.S. Federal Income Tax Treatment of the Reclassification — Section 306 Stock.”

Liberty Media is not seeking a private letter ruling from the IRS regarding (i) the determination that the Liberty Media tracking stocks (before and after the Reclassification) constitute stock of Liberty Media for U.S. federal income tax purposes, (ii) the qualification of the Reclassification as a reorganization under Section 368(a)(1)(E) of the Code, or (iii) the characterization of the tracking stock under Section 306 of the Code.

Risks Relating to an Investment in Liberty Media as a Whole

The success of businesses attributed to each of Liberty Media’s tracking stock groups, in part, depends on their popularity with audiences, which is difficult to predict.

Entertainment content production, satellite radio services and live entertainment events, including sporting events, are inherently risky businesses because the revenue derived from these businesses depends primarily upon their popularity with public audiences, which is difficult to predict. The commercial success of a satellite radio program or live entertainment depends upon the quality and acceptance of competing programs, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, many of which are difficult to predict. In the case of ad-supported programming, events and satellite radio service, audience size is an important factor when advertising rates are negotiated. Audience size is also an important factor when determining ticket pricing for live entertainment events and the value of broadcast rights. Consequently, low public acceptance of the programs, services and events provided by companies such as Sirius XM Holdings, Live Nation and Formula 1 could hurt the ability of these companies to maintain or grow revenue, which would adversely impact the financial performance of the groups to which these companies are attributed.

Liberty Media’s businesses attributed to the New Liberty SiriusXM Group, the New Formula One Group and the Liberty Live Group, such as Sirius XM Holdings, Formula 1 and Live Nation, may not realize the benefits of acquisitions or other strategic investments and initiatives.

Liberty Media’s business strategy and that of its subsidiaries and business affiliates, including Sirius XM Holdings, Formula 1 and Live Nation, may include selective acquisitions, other strategic investments and initiatives that allow them to expand their business. The success of any acquisition depends upon effective integration and management of acquired businesses and assets into the acquirer’s operations, which is

 

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subject to risks and uncertainties, including the realization of the growth potential, any anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of management’s attention from other business concerns, and undisclosed or potential legal liabilities of acquired businesses or assets.

Weak economic conditions may reduce consumer demand for products, services and events offered by Liberty Media’s businesses attributed to each of its groups.

A weak global economy, including as a result of the current COVID-19 pandemic, inflation and any recession, could adversely affect demand for Liberty Media’s businesses’ products, services and events. A substantial portion of Liberty Media’s revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. A reduction in discretionary spending could adversely affect revenue through potential downgrades by satellite radio subscribers and could overall affect subscriber churn, conversion rates and vehicle sales (in the case of Sirius XM Holdings) or reduced live-entertainment and sporting event expenditures (in the case of Formula 1 and Live Nation). Accordingly, the ability of Liberty Media’s businesses attributed to each of its groups to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments remain weak or decline further. Liberty Media currently is unable to predict the extent of any of these potential adverse effects.

The unfavorable outcome of pending or future litigation could have a material adverse impact on the operations and financial condition of businesses attributed to each of Liberty Media’s groups.

Liberty Media’s subsidiaries and business affiliates are parties to several legal proceedings arising out of various aspects of their businesses, including class actions arising out of their marketing practices. The outcome of these proceedings may not be favorable, and one or more unfavorable outcomes could have a material adverse impact on their financial condition, which can impact the financial performance of the group to which they are attributed.

Formula 1 and Live Nation have been, and may continue to be, materially impacted by COVID-19 and local, state and federal government actions taken in response, which may have a negative impact on Liberty Media’s results of operations and financial condition.

The global spread of COVID-19 prompted most local, state, federal and foreign governmental agencies to impose travel restrictions and local quarantines or stay at home restrictions to contain the spread. As a result, the business operations of Formula 1 and Live Nation initially were largely, if not completely, suspended at the outset of COVID-19. The first ten races of the 2020 Formula 1 season were either cancelled or postponed. Live Nation events were initially severely impacted by COVID-19, with the vast majority of shows being postponed and the remainder cancelled with refunds issued. However, beginning in July 2020, Formula 1 resumed races, although with no fan attendance.

Formula 1 originally scheduled 23 Events in 2021, and after a number of Events were cancelled and/or replaced, a record 22 Events took place. Formula 1 had limitations on the number of fans in attendance at certain Events in 2021, thereby reducing revenue associated with fan attendance. Starting in the third quarter of 2021, Live Nation saw a meaningful restart of its operations, with growth in ticket sales, new sponsor partners and the resumption of shows, primarily in the United States and United Kingdom. It is unclear whether and to what extent COVID-19 concerns will continue to impact the use of and/or demand for the entertainment, events and services provided by these businesses and demand for sponsorship and advertising assets. If these businesses face cancelled events, closed venues and reduced attendance, the impact may substantially decrease Liberty Media’s revenue. Due to the revenue reductions caused by COVID-19 to date, these businesses have looked to reduce expenses, but should such impacts resume, the businesses may not be able to reduce expenses to the same degree as any decline in revenue, which may adversely affect Liberty Media’s results of operations and cash flow.

In addition, Liberty Media’s businesses are particularly sensitive to reductions in travel and discretionary consumer spending. Liberty Media cannot predict the time period over which its businesses will be impacted by COVID-19. Over the long-term, COVID-19 could impede economic activity in impacted regions or globally, causing a global recession, leading to a further decline in discretionary spending on sports and entertainment events and other leisure activities, which could result in long-term effects on Liberty Media’s businesses.

 

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Even as Liberty Media’s businesses have resumed more normal operations, there can be no assurances that fans attending events or vendors and employees working at Liberty Media’s events will not contract COVID-19 in the course of attending or providing services. Any such occurrence could result in litigation, legal and other costs, insufficient staff or supply to provide services and reputational risk that could materially and adversely impact Liberty Media’s businesses and results of operations. Even after the COVID-19 pandemic subsides, the U.S. economy may experience a recession, and Liberty Media anticipates its businesses and operations could be materially adversely affected.

Risks Relating to the New Liberty SiriusXM Group

Sirius XM Holdings has been, and may continue to be, adversely affected by certain supply chain issues.

The issues associated with the global supply chain for parts and components is having wide-ranging effects across multiple industries, including direct and indirect effects on Sirius XM Holdings’ business.

Automakers are experiencing, and may continue to experience, delays in securing certain components that are essential to the production of new vehicles for a variety of reasons, including due to the global semiconductor supply shortage and the war in Ukraine. All of these affected automakers manufacture and sell vehicles that include Sirius XM Holdings’ satellite radios. For example, some automobile plants in North America and elsewhere have at times halted or reduced vehicle production due to the shortage of certain components used in the production of their vehicles. As a result, these supply chain shortages have had, and may continue to have, an impact on new vehicle production and deliveries, which in turn may affect Sirius XM Holdings’ subscriber acquisition efforts.

Sirius XM Holdings also has experienced, and may continue to experience, delays in securing certain application specific integrated circuits (which are commonly referred to as “chipsets”) that are essential components of Sirius XM Holdings’ satellite radios. In addition, the war in Ukraine could affect the supply of certain components that Sirius XM Holdings relies on in connection with its business and operations, such as certain subsystems that are planned to be integrated as part of SXM-10, one of the satellites that is currently under construction for Sirius XM Holdings’ system, and software.

Sirius XM Holdings faces substantial competition and that competition is likely to increase over time.

Sirius XM Holdings competes for the time and attention of its listeners with other content providers on the basis of a number of factors, including quality of experience, relevance, acceptance and perception of content quality, ease of use, price, accessibility, brand awareness, reputation and, in the case of its ad-supported Pandora service, perception of ad load, features and functionality. Sirius XM Holdings’ ability to attract and retain subscribers and listeners depends on its success in creating and providing popular or unique programming.

Sirius XM Holdings’ subscribers and listeners can obtain similar content for free through terrestrial radio stations, YouTube and other internet services. Sirius XM Holdings also competes for the time and attention of its listeners with providers of other in-home and mobile entertainment services, and it competes for advertising sales with large scale online advertising platforms, such as Amazon, Facebook and Google, and with traditional media outlets.

Sirius XM Holdings’ streaming services also compete for listeners on the basis of the presence and visibility of its apps, which are distributed via app stores operated by Apple and Google. Sirius XM Holdings faces significant competition for listeners from these companies, which also promote their own music and content. In addition, Sirius XM Holdings’ competitors’ streaming products may be pre-loaded or integrated into consumer electronics products or automobiles more broadly than Sirius XM Holdings’ streaming products, creating a visibility advantage. If Sirius XM Holdings is unable to compete successfully for listeners against other media providers, then its business may suffer. Additionally, the operator of an app store may reject Sirius XM Holdings’ app or amend the terms of their license in a way that inhibits Sirius XM Holdings’ ability to distribute its apps, negatively affects its business, or limits its ability to increase subscribers and listeners.

Competition could result in lower subscription, advertising or other revenue and an increase in Sirius XM Holdings’ expenses and, consequently, lower its earnings and free cash flow. Sirius XM Holdings cannot

 

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provide assurance that it will be able to compete successfully with its existing or future competitors or that competition will not have an adverse impact on its operations and financial condition.

If Sirius XM Holdings’ efforts to attract and retain subscribers and listeners, or convert listeners into subscribers, are not successful, its business will be adversely affected.

Sirius XM Holdings’ business will be adversely affected if it is unable to attract new subscribers and listeners and retain its current subscribers and listeners.

Sirius XM Holdings’ ability to increase the number of subscribers and listeners to its services, retain its subscribers and listeners or convert listeners into subscribers, is uncertain and subject to many factors, including:

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the price of Sirius XM Holdings’ service;

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the ease of use of Sirius XM Holdings’ service;

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the effectiveness of Sirius XM Holdings’ marketing programs;

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with respect to its Sirius XM service, the sale or lease rate of new vehicles in the United States;

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the rate at which Sirius XM Holdings’ self-pay subscribers to its Sirius XM service buy and sell new and used vehicles in the United States;

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Sirius XM Holdings’ ability to convince owners and lessees of new and used vehicles that include satellite radios to purchase subscriptions to its Sirius XM service;

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the perceived value of Sirius XM Holdings’ programming and the packages and services it offers;

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Sirius XM Holdings’ ability to introduce features in a manner that is favorably received by its consumers;

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Sirius XM Holdings’ ability to keep up with rapidly evolving technology and features in audio entertainment;

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Sirius XM Holdings’ ability to respond to evolving consumer tastes; and

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actions by Sirius XM Holdings’ competitors, such as Spotify, Apple, Google, Amazon, Facebook and other audio entertainment and information providers.

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Sirius XM Holdings engages in extensive marketing efforts and the continued effectiveness of those efforts is an important part of its business.

Sirius XM Holdings engages in extensive marketing efforts across a broad range of media to attract and retain subscribers and listeners to its services. Sirius XM Holdings employs a wide variety of communications tools as part of its marketing campaigns, including telemarketing efforts and email solicitations. The effectiveness of its marketing efforts is affected by a broad range of factors, including creative and execution factors. Sirius XM Holdings’ ability to reach consumers with radio and television advertising, direct mail materials, email solicitations and telephone calls is an important part of its efforts and a significant factor in the effectiveness of its marketing. If Sirius XM Holdings is unable to reach consumers through email solicitations or telemarketing, including as a result of “spam” and email filters, call blocking technologies or “do-not-call” or other marketing regulations, its marketing efforts will be adversely affected. A decline in the effectiveness of its marketing efforts could have an adverse impact on its operations and financial condition.

Sirius XM Holdings relies on third parties for the operation of its business, and the failure of third parties to perform could adversely affect its business.

Sirius XM Holdings’ business depends, in part, on various third parties, including:

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manufacturers that build and distribute satellite radios;

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companies that manufacture and sell integrated circuits for satellite radios;

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third-party software that Sirius XM Holdings incorporates in and includes with its apps and service;

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programming providers, including agreements with owners of various copyrights in music, and on-air talent;

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vendors that operate its call centers;

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vendors that have designed or built, and vendors that support or operate, other important elements of Sirius XM Holdings’ systems, including its satellites and “cloud”-based systems;

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Apple, who distributes Sirius XM Holdings’ apps through its App Store and who, in the case of the Pandora service, Sirius XM Holdings relies on to collect fees and approve the terms of its consumer offers; and

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Google, who distributes Sirius XM Holdings’ apps through its App Store and who Sirius XM Holdings, in the case of the Pandora service, relies on to collect fees and approve the terms of its consumer offers, and who plays an important role in the fulfillment of the ads Sirius XM Holdings sells on its Pandora platform.

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If one or more of these third parties do not perform in a satisfactory or timely manner, including complying with Sirius XM Holdings’ standards and practices relating to business integrity, personnel and cybersecurity, its business could be adversely affected.

The operation of Sirius XM Holdings’ apps and service offerings could be impaired if errors occur in the third party software that it uses. It is difficult for Sirius XM Holdings to correct any defects in third party software because the development and maintenance of the software is not within its control. Sirius XM Holdings’ third party licensors may not continue to make their software available to Sirius XM Holdings on acceptable terms, invest the appropriate levels of resources in their software to maintain and enhance its capabilities, or remain in business. Failure of these third-party licensors could harm Sirius XM Holdings’ streaming services.

In addition, a number of third parties on which Sirius XM Holdings depends have experienced, and may in the future experience, financial difficulties or file for bankruptcy protection. Such third parties may not be able to perform their obligations to Sirius XM Holdings in a timely manner, if at all, as a result of their financial condition or may be relieved of their obligations to Sirius XM Holdings as part of seeking bankruptcy protection.

Sirius XM Holdings may not realize the benefits of acquisitions or other strategic investments and initiatives.

Sirius XM Holdings’ strategy includes selective acquisitions, other strategic investments and initiatives in an effort to expand its business. The success of any acquisition depends upon effective integration, cultural assimilation and management of acquired businesses and assets into its operations, which is subject to risks and uncertainties, including realizing the growth potential, the anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of management’s attention for other business concerns, and undisclosed or potential legal liabilities of the acquired business or assets.

Sirius XM Holdings is devoting significant management attention and resources to integrate the businesses and operations of certain acquisitions. The integration process could distract Sirius XM Holdings’ management, disrupt its ongoing business or result in inconsistencies in Sirius XM Holdings’ services, standards, controls, procedures and policies, any of which could adversely affect its ability to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the acquisition.

A substantial number of Sirius XM service subscribers periodically cancel their subscriptions and Sirius XM Holdings cannot predict how successful it will be at retaining customers.

As part of Sirius XM Holdings’ business, it experiences, and expects to experience in the future, subscriber turnover (i.e., churn). If Sirius XM Holdings is unable to retain current subscribers at expected rates, or the costs of retaining subscribers are higher than expected, its financial performance and operating results could be adversely affected.

 

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Sirius XM Holdings cannot predict how successful it will be at retaining customers who purchase or lease vehicles that include a subscription to its Sirius XM service. A substantial percentage of Sirius XM subscribers are on discounted pricing plans and Sirius XM Holdings’ ability to retain these subscribers or migrate them to higher priced plans is uncertain. Sirius XM Holdings discounted pricing strategy is widely known, and this may interfere with its ability to collect its ordinary subscription prices. In addition, a substantial number of those subscribers periodically cancel their subscriptions when offered a subscription at a higher price.

Sirius XM Holdings’ ability to profitably attract and retain subscribers to its Sirius XM service as its marketing efforts reach more price-sensitive consumers is uncertain.

Sirius XM Holdings’ efforts to acquire subscribers purchasing or leasing used vehicles may attract price sensitive consumers. For example, consumers purchasing or leasing used vehicles may be more price sensitive than consumers purchasing or leasing new vehicles, may convert from trial subscribers to self-paying subscribers at a lower rate, and may cancel their subscriptions more frequently than consumers purchasing or leasing new vehicles. Some of Sirius XM Holdings’ marketing efforts may also attract more price sensitive subscribers, and its efforts to increase the penetration of satellite radios in new, lower-priced vehicle lines may result in the growth of more economy-minded subscribers. In addition, over time the changing demographics of Sirius XM Holdings’ subscriber base, such as the expected increase in “Millennial generation customers,” may increase the number of subscribers accustomed to consuming entertainment through ad-supported products. Each of these factors may harm Sirius XM Holdings’ revenue or require additional spending on marketing efforts to demonstrate the value of its Sirius XM service.

Sirius XM Holdings’ business depends in part upon the auto industry.

A substantial portion of the subscription growth for Sirius XM Holdings’ satellite radio service has come from purchasers and lessees of new and used automobiles in the United States, and Sirius XM Holdings expects this to be an important source of subscribers for its satellite radio service in the future.

Sirius XM Holdings has agreements with major automakers to include satellite radios in new vehicles, although these agreements do not require automakers to install specific or minimum quantities of radios in any given period. Sirius XM Holdings’ business could be adversely affected if automakers do not continue to include its Sirius XM service in their products.

Automotive production and sales are dependent on many factors, including the availability of vehicle components, consumer credit, general economic conditions, consumer confidence and fuel costs. To the extent vehicle sales by automakers decline, or the penetration of factory-installed satellite radios in those vehicles is reduced, subscriber growth for Sirius XM Holdings’ satellite radio service may be adversely impacted.

Sales of used vehicles represent a significant source of new subscribers for Sirius XM Holdings’ satellite radio service. Sirius XM Holdings has agreements with auto dealers and companies operating in the used vehicle market to provide it with data on sales of used satellite radio enabled vehicles, including in many cases the consumer’s name and address. The continuing availability of this data is important to Sirius XM Holdings’ future growth, and the loss of such data may harm its revenue and business.

Failure of Sirius XM Holdings’ satellites would significantly damage its business.

The lives of the satellites required to operate the Sirius XM service vary depending on a number of factors, including:

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degradation and durability of solar panels;

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quality of construction;

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random failure of satellite components, which could result in significant damage to or loss of a satellite;

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amount of fuel the satellite consumes;

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the performance of third parties that manage the operation of its satellites; and

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damage or destruction as a result of electrostatic storms, terrorist attacks, collisions with other objects in space or other events, such as nuclear detonations, occurring in space.

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In the ordinary course of operation, satellites experience failures of component parts and operational and performance anomalies. Components on several of Sirius XM Holdings’ in-orbit satellites have failed, and from time to time it has experienced anomalies in the operation and performance of these satellites. These failures and anomalies are expected to continue in the ordinary course, and Sirius XM Holdings cannot predict if any of these possible future events will have a material adverse effect on its operations or the life of its existing in-orbit satellites. In addition, the Sirius network of terrestrial repeaters communicates with a single third-party satellite. The XM network of terrestrial repeaters communicates with a single XM satellite. If the satellites communicating with the applicable repeater network fail unexpectedly, the services would be disrupted for several hours or longer.

Any material failure of Sirius XM Holdings’ operating satellites could cause it to lose customers for its Sirius XM service and could materially harm its reputation and its operating results. With the exception of the insurance Sirius XM Holdings has purchased covering the launch and the first year of in-orbit operation of the SXM-8 satellite, it does not have insurance for its in-orbit satellites.

The Sirius XM service may experience harmful interference from wireless operations.

The development of applications and services in spectrum adjacent to the frequencies licensed to Sirius XM Holdings, as well as the combination of signals in other frequencies, may cause harmful interference to its satellite radio service in certain areas of the United States. Certain operations or combination of operations permitted by the FCC in spectrum, other than Sirius XM Holdings’ licensed frequencies, results in the loss of signal to its service, and the reception of its satellite radio service can be adversely affected in certain areas. Elimination of this interference may not be possible in all cases. In other cases, Sirius XM Holdings’ efforts to reduce this interference may require extensive engineering efforts and additions to its terrestrial infrastructure. These mitigation efforts may be costly and take several years to implement and may not be entirely effective. In certain cases, Sirius XM Holdings is dependent on the FCC to assist it in preventing harmful interference to its service.

Pandora’s ad-supported business has suffered a substantial and consistent loss of monthly active users, which may adversely affect its business.

The number of monthly active users to Sirius XM Holdings’ ad-supported Pandora business has declined consistently for several years, including in 2021, and may further contract in the future.

The size of Sirius XM Holdings’ ad-supported listener base is an important element of its Pandora business. The decline in Sirius XM Holdings’ listener base has resulted in fewer listener hours and available advertising spots on its Pandora service, which ultimately may result in declines in advertising revenue, and adversely affect its Pandora business. The contraction of Sirius XM Holdings’ ad-supported listener base also decreases the size of demographic groups targeted by advertisers, which may hurt Sirius XM Holdings’ ability to deliver advertising in a manner that maximizes advertisers’ return on investment and compete with other digital advertising platforms.

Sirius XM Holdings’ failure to convince advertisers of the benefits of its Pandora ad-supported service could harm its business.

Sirius XM Holdings derives substantial revenue on its Pandora service from the sale of advertising. Sirius XM Holdings’ ability to attract and retain advertisers, and ultimately to sell its advertising inventory, depends on a number of factors, including:

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the number of listener hours on the Pandora ad-supported service, particularly the number of listener hours attributable to high-value demographics;

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keeping pace with changes in technology and its competitors, some of which have significant influence over the distribution of the Pandora app;

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competing effectively for advertising with other dominant online services, such as Spotify, Google and Facebook, as well as other marketing and media outlets, some of which provide services to Sirius XM Holdings that it depends upon to fulfill the advertising it sells;

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successfully competing for local radio advertising;

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demonstrating the ability of advertisements to reach targeted audiences, including the value of mobile digital advertising;

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ensuring that new ad formats and ad product offerings are attractive to advertisers and that inventory management decisions (such as changes to ad load, frequency, prominence and quality of ads that Sirius XM Holdings serves listeners) do not have a negative impact on listener hours; and

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adapting to technologies designed to block the display of its ads.

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Sirius XM Holdings’ agreements with advertisers are generally short-term and may be terminated at any time by the advertiser. Advertisers may leave Sirius XM Holdings for competing alternatives at any time. Failure to demonstrate to advertisers the value of its Pandora service would result in reduced spending by, or loss of, advertisers, which would harm its revenue and business.

If Sirius XM Holdings is unable to maintain revenue growth from its advertising products, its results of operations will be adversely affected.

In order to effectively monetize listener hours, Sirius XM Holdings must, among other things, penetrate local advertising markets and develop compelling ad product solutions.

The substantial majority of the total listening to the Pandora service occurs on mobile devices. Sirius XM Holdings is engaged in efforts to continue to convince advertisers of the capabilities and value of mobile digital advertising and to direct an increasing portion of their advertising spend to its ad-supported Pandora service.

Sirius XM Holdings is continuing to build its sales capability to penetrate local advertising markets, which places Sirius XM Holdings in competition with terrestrial radio. Sirius XM Holdings may not be able to capture an increasing share of local and audio advertising revenue, which may have an adverse impact on future revenue.

Changes to mobile operating systems and browsers may hinder Sirius XM Holdings’ ability to sell advertising and market its services.

Sirius XM Holdings uses shared common device identifiers that are universal in the advertising technology ecosystem, such as Apple’s Identifier for Advertisers, a random device identifier assigned by Apple to a user’s device. Sirius XM Holdings uses these common device identifiers for targeting, advertising effectiveness and measurement for the Pandora advertising business and for Pandora’s consumer marketing purposes. These common device identifiers enable Sirius XM Holdings to match audiences, including with second- and third-party data providers and measurement vendors and enhance Pandora’s advertising targeting segments with additional data. In its programmatic advertising business, Sirius XM Holdings uses common identifiers for several important functions, such as targeting and bidding. Sirius XM Holdings also uses common device identifiers to evaluate the success of its Pandora brand consumer marketing campaigns.

Apple, as well as mobile operating system and browser providers, have implemented product features and plans that may adversely impact Sirius XM Holdings’ ability to use these common identifiers and data collected in connection with these common identifiers in its Pandora business.

If Sirius XM Holdings fails to accurately predict and play music, comedy or other content that its Pandora listeners enjoy, it may fail to retain existing and attract new listeners.

A key differentiating factor between the Pandora service and other music content providers is its ability to predict music that its listeners will enjoy. The effectiveness of Sirius XM Holdings’ personalized playlist generating system depends, in part, on its ability to gather and effectively analyze large amounts of listener

 

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data and feedback. Sirius XM Holdings may not continue to be successful in enticing listeners to its Pandora service to give a thumbs-up or thumbs-down to enough songs to effectively predict and select new and existing songs. In addition, Sirius XM Holdings’ ability to offer listeners songs that they have not previously heard and impart a sense of discovery depends on its ability to acquire and appropriately categorize additional tracks that will appeal to its listeners’ diverse and changing tastes. Many of Sirius XM Holdings’ competitors currently have larger music and content catalogs than it offers and they may be more effective in providing their listeners with an appealing listener experience.

Sirius XM Holdings also provides comedy and podcast content on its Pandora service, and it tries to predict what its listeners will enjoy using technology similar to the technology that it uses to generate personalized playlists for music. The risks that apply to Sirius XM Holdings’ ability to satisfy its listeners’ musical tastes apply to comedy, podcasts and other content to an even greater extent, particularly since Sirius XM Holdings does not yet have as large a data set on listener preferences for comedy, podcasts and other content, and have a smaller catalog of such content as compared to music.

Sirius XM Holdings’ ability to predict and select music, comedy, podcasts and other content that its listeners enjoy is important to the perceived value of its Pandora service to consumers and the failure to make accurate predictions would adversely affect its ability to attract and retain subscribers and listeners, increase listener hours and sell advertising.

Privacy and data security laws and regulations may hinder Sirius XM Holdings’ ability to market its services, sell advertising and impose legal liabilities.

Sirius XM Holdings receives a substantial amount of data on purchasers and lessees of new and used vehicles from third parties. Sirius XM Holdings uses this data to market its services. Sirius XM Holdings collects and uses demographic and other information, including location information, from and about its listeners through the internet. Further, Sirius XM Holdings and third parties use tracking technologies, including “cookies” and related technologies, to help it manage and track its listeners’ interactions with its services and deliver relevant advertising.

Various federal and state laws and regulations, as well as the laws of foreign jurisdictions, govern the collection, use, retention, sharing and security of the data Sirius XM Holdings receives. Privacy groups and government authorities have increasingly scrutinized the ways in which companies collect and share data, including linking personal identities and data associated with particular users or devices with data collected through the internet, and Sirius XM Holdings expects such scrutiny to increase. Alleged violations of laws and regulations relating to privacy and data may expose Sirius XM Holdings to potential liability, may require Sirius XM Holdings to expend significant resources in responding to and defending such allegations and claims and could in the future result in negative publicity and a loss of confidence in Sirius XM Holdings by its subscribers, listeners and advertisers.

Privacy-related laws and regulations, such as the California Consumer Privacy Act and the European General Data Protection Regulation (GDPR), are evolving and subject to potentially differing interpretations. Various federal and state legislative and regulatory bodies as well as foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy and data security-related matters. New laws, amendments to or re-interpretations of existing laws and contractual obligations, as well as changes in Sirius XM Holdings’ listeners’ expectations and demands regarding privacy and data security, may limit its ability to collect and use consumer data. Restrictions on Sirius XM Holdings’ ability to collect, access and harness listener data, or to use or disclose listener data or profiles that it develops using such data, could limit its ability to deliver personalized content to its listeners and offer targeted advertising opportunities to its advertisers, each of which are important to the success of its business. Increased regulation of data utilization and distribution practices could increase Sirius XM Holdings’ costs of operation or otherwise adversely affect its business.

Consumer protection laws and Sirius XM Holdings’ failure to comply with them could damage its business.

Federal and state consumer protection laws, rules and regulations cover nearly all aspects of Sirius XM Holdings’ marketing efforts, including the content of its advertising, the terms of consumer offers and the

 

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manner in which it communicates with consumers. A number of governmental authorities have commenced investigations into Sirius XM Holdings’ consumer practices, including the manner in which it allows consumers to cancel subscriptions to its services. The nature of Sirius XM Holdings’ business requires it to expend significant resources to try to ensure that its marketing activities comply with consumer protection laws, including laws relating to telemarketing activities and privacy. These efforts may not be successful and Sirius XM Holdings may have to expend even greater resources in its compliance efforts.

Modifications to consumer protection laws, including decisions by courts and administrative agencies interpreting these laws, could have an adverse impact on Sirius XM Holdings’ ability to attract and retain subscribers and listeners to its services. There can be no assurance that new laws or regulations will not be enacted or adopted, preexisting laws or regulations will not be more strictly enforced or that its operations will comply with all applicable laws, which could have an adverse impact on its operations and financial condition.

Failure to comply with FCC requirements could damage Sirius XM Holdings’ business.

Sirius XM Holdings holds FCC licenses and authorizations to operate commercial satellite radio services in the United States, including satellites, terrestrial repeaters, and related authorizations. The FCC generally grants licenses and authorizations for a fixed term. Although Sirius XM Holdings expects its licenses and authorizations to be renewed in the ordinary course upon their expiration, there can be no assurance that this will be the case. Any assignment or transfer of control of any of Sirius XM Holdings’ FCC licenses or authorizations must be approved in advance by the FCC.

The operation of Sirius XM Holdings’ satellite radio systems is subject to significant regulation by the FCC under authority granted through the Communications Act of 1934 and related federal law. Sirius XM Holdings is required, among other things, to operate only within specified frequencies; to coordinate its satellite radio services with radio systems operating in the same range of frequencies in neighboring countries; and to coordinate its communications links to its satellites with other systems that operate in the same frequency band.

Noncompliance by Sirius XM Holdings with these requirements or other conditions or with other applicable FCC rules and regulations could result in fines, additional license conditions, license revocation or other detrimental FCC actions. There is no guarantee that Congress will not modify the statutory framework governing Sirius XM Holdings’ services, or that the FCC will not modify its rules and regulations in a manner that would have an adverse impact on Sirius XM Holdings’ operations.

If Sirius XM Holdings fails to protect the security of personal information about its customers, it could be subject to costly government enforcement actions and private litigation and its reputation could suffer.

The nature of Sirius XM Holdings’ business involves the receipt and storage of personal information about its subscribers and listeners including, in many cases, credit and debit card information. Sirius XM Holdings has a program in place to detect and respond to data security incidents. However, the techniques used to gain unauthorized access to data systems are constantly evolving and may be difficult to detect for long periods of time. Sirius XM Holdings may be unable to anticipate or prevent unauthorized access to data pertaining to its customers, including credit card and debit card information and other personally identifiable information. Sirius XM Holdings’ services, which are supported by its own systems and those of third-party vendors, are vulnerable to computer malware and attacks, as well as to catastrophic events (such as fires, floods, hurricanes or tornados), any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information.

For many companies, remote and/or hybrid in-office work arrangements resulting from the COVID-19 pandemic have made their network and communication systems more vulnerable to cyberattacks and incursions, and there has been an overall increase in both the frequency and severity of cyber incidents as such vulnerabilities have been exploited. Continued implementation of a full or partial remote work environment may subject Sirius XM Holdings to a heightened and ongoing risk of cyberattacks, unauthorized access or other privacy or data security incidents, both directly as well as indirectly through third-party intermediaries, service providers and vendors that have access or other connections to Sirius XM Holdings’ systems.

 

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If Sirius XM Holdings fails to protect the security of personal information about its customers or if an actual or perceived breach of security occurs on its systems or a vendor’s systems, Sirius XM Holdings could be exposed to costly government enforcement actions and private litigation and its reputation could suffer. Sirius XM Holdings may also be required to expend significant resources to address these problems, including notification under various data privacy regulations, and its reputation and operating results could suffer. In addition, Sirius XM Holdings’ subscribers and listeners, as well as potential customers, could lose confidence in its ability to protect their personal information, which could cause them to discontinue the use of Sirius XM Holdings’ services. This loss of confidence would also harm Sirius XM Holdings’ efforts to attract and retain advertisers, and unauthorized access to its programming would potentially create additional royalty expense with no corresponding revenue. Such events could adversely affect its results of operations. The costs of maintaining adequate protection, including insurance protection, against such threats as they develop in the future (or as legal requirements related to data security increase) could be material.

In addition, hardware, software, or applications Sirius XM Holdings develops or procures from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to Sirius XM Holdings’ systems or facilities, or those of third parties with whom it does business, through fraud, trickery, or other forms of deceiving its employees, contractors or other agents. Sirius XM Holdings may not be able to effectively control the unauthorized actions of third parties who may have access to the data it collects.

Sirius XM Holdings may integrate the Pandora service with apps provided by third parties. In such case, Sirius XM Holdings may not be able to control such third parties’ use of listeners’ data, ensure their compliance with the terms of its privacy policies, or prevent unauthorized access to, or use or disclosure of, information, any of which could expose Sirius XM Holdings to potential liability and negative publicity and could cause its listeners and advertisers to discontinue use of its services.

To date, Sirius XM Holdings is not aware that it has had a significant cyber-attack or breach that has had a material impact on its business or results of operations. Sirius XM Holdings has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of sensitive, confidential and personal data, including through the use of encryption and authentication technologies. Additionally, Sirius XM Holdings has increased its monitoring capabilities to enhance early detection and timely response to potential security anomalies.

The cyber security measures Sirius XM Holdings has implemented, however, may not be sufficient to prevent all possible attacks and may be vulnerable to hacking, employee error, ransom attacks, malfeasance, system error, faulty password management or other irregularities. Further, the development and maintenance of these measures are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated.

Interruption or failure of Sirius XM Holdings’ information technology and communications systems could impair the delivery of its service and harm its business.

Sirius XM Holdings relies on systems housed at its own premises and at those of third party vendors to enable subscribers and listeners to access its Pandora and Sirius XM services in a dependable and efficient manner. Any degradation in the quality, or any failure, of Sirius XM Holdings’ systems could reduce its revenue, cause it to lose customers and damage its brands. Although Sirius XM Holdings has implemented practices designed to maintain the availability of the information technology systems it relies on and mitigate the harm of any unplanned interruptions, Sirius XM Holdings cannot anticipate all eventualities. Sirius XM Holdings occasionally experience unplanned outages or technical difficulties. Sirius XM Holdings could also experience loss of data or processing capabilities, which could cause it to lose customers and could harm its reputation and operating results.

Sirius XM Holdings relies on internal systems and external systems maintained by manufacturers, distributors and service providers to take, fulfill and handle customer service requests and host certain online activities. Any interruption or failure of Sirius XM Holdings’ internal or external systems could prevent it from servicing customers or cause data to be unintentionally disclosed. Sirius XM Holdings’ services have experienced, and are expected to continue to experience, periodic service interruptions and delays involving its own systems and those of its vendors.

 

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Sirius XM Holdings’ data centers and its information technology and communications systems are vulnerable to damage or interruption from natural disasters, malicious attacks, fire, power loss, telecommunications failures, computer viruses or other attempts to harm its systems. The occurrence of any of these events could result in interruptions in Sirius XM Holdings’ services and unauthorized access to, or alteration of, the content and data contained on its systems and that these third-party vendors store and deliver on its behalf.

Damage or interruption to Sirius XM Holdings’ data centers and information technology and communications centers could expose it to data loss or manipulation, disruption of service, monetary and reputational damages, competitive disadvantage and significant increases in compliance costs and costs to improve the security and resiliency of its computer systems. The compromise of personal, confidential or proprietary information could also subject Sirius XM Holdings to legal liability or regulatory action under evolving cybersecurity, data protection and privacy laws and regulations enacted by the U.S. federal and state governments or other foreign jurisdictions or by various regulatory organizations. As a result, Sirius XM Holdings’ ability to conduct its business and its results of operations might be adversely affected.

The market for music rights is changing and is subject to significant uncertainties.

Sirius XM Holdings must maintain music programming royalty arrangements with, and pay license fees to, owners of rights in musical works in order to operate its services. Traditionally, Broadcast Music, Inc., Authors and Publishers and SESAC, Inc. have negotiated for these copyright users, collected royalties and distributed them to songwriters and music publishers. These traditional arrangements are changing. The fracturing of the traditional system for licensing rights in musical works may have significant consequences to Sirius XM Holdings’ business, including increasing licensing costs and reducing the availability of certain pieces for use on its services.

Under the United States Copyright Act (the Copyright Act), Sirius XM Holdings also must pay royalties to copyright owners of sound recordings for the performance of such sound recordings on its Sirius XM service. Those royalty rates may be established through negotiation or, if negotiation is unsuccessful, by the Copyright Royalty Board (the CRB). Owners of copyrights in sound recordings have created SoundExchange, a collective organization, to collect and distribute royalties. SoundExchange is exempt by statute from certain U.S. antitrust laws and exercises significant market power in the licensing of sound recordings. Under the terms of the CRB’s existing decision governing sound recording royalties for satellite radio, Sirius XM Holdings is required to pay a royalty based on its gross revenue associated with its satellite radio service, subject to certain exclusions, of 15.5% per year for each of the next six years.

Pandora’s services depend upon maintaining complex licenses with copyright owners, and these licenses contain onerous terms.

Pandora has direct license agreements with many sound recording copyright and musical work copyright owners. These agreements grant Sirius XM Holdings the right to operate Pandora Premium, and add interactive features, such as replays, additional skips and offline play, to Pandora’s ad-supported service and to Pandora Plus.

The economic terms of these direct licenses are onerous and, as a result, Sirius XM Holdings may not be able to profitably operate the Pandora services. However, the economic terms of these direct licenses may be “market,” given the rates paid by Pandora’s competitors. Competition for Pandora’s services are primarily offered by entities that provide music and entertainment services as a small part of a larger business, such as Apple, Google and Amazon. These competitors have the ability to bear these onerous economic provisions to a much greater extent than the Pandora business. Sirius XM Holdings may not be able to negotiate or obtain lower royalty rates under these direct licenses.

These direct licenses are complex. Sirius XM Holdings may not be in compliance with the terms of these licenses, which could result in the loss of some or all of these licenses and some or all of the rights they convey. Similarly, many of these licenses provide that if the licensor loses rights in a portion of the content licensed under the agreement, that content may be removed from the license going-forward.

If Pandora fails to maintain these direct licenses, or if rights to certain music were no longer available under these licenses, then Sirius XM Holdings may have to remove the affected music from Pandora’s services,

 

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or discontinue certain interactive features for such music, and it might become commercially impractical for Sirius XM Holdings to operate Pandora Premium, Pandora Plus or certain features of its advertising supported service. Any of these occurrences could have an adverse effect on Sirius XM Holdings’ business, financial condition and results of operations.

Several of these direct licenses also include provisions related to the terms of those agreements relative to other content licensing arrangements, which are commonly referred to as “most favored nation” clauses. These provisions have caused, and may in the future cause, Sirius XM Holdings’ payments under those agreements to escalate substantially. In addition, many record labels, music publishers and performing rights organizations have the right to audit Sirius XM’s royalty payments, and these audits often result in disputes over whether it has paid the proper amounts. As a result of such audits, Sirius XM Holdings could be required to pay additional amounts, audit fees and interest or penalties, and the amounts involved could adversely affect its business, financial condition and results of operations.

There is no guarantee that these direct licenses will be renewed in the future or that such licenses will be available on the economic terms associated with the current licenses. If Sirius XM Holdings is unable to secure and maintain direct licenses for the rights to provide music on its Pandora services on terms similar to those under its current direct licenses, Sirius XM Holdings’ content costs could rise and adversely affect its business, financial condition and results of operations.

The rates Sirius XM Holdings must pay for “mechanical rights” to use musical works on its Pandora service have increased substantially and these rates may adversely affect its business.

Pandora has direct licenses with thousands of music publishers. Those licenses provide that the royalty rate for “reproduction rights” or “mechanical rights”, which are required to offer the interactive features of its Pandora services, are determined by the rate formula set by the Copyright Royalty Board for the compulsory license made available by Section 115 of the Copyright Act. These royalty rates also apply to Pandora’s use of musical works for which Sirius XM Holdings does not have a direct license with the copyright owners.

The CRB has issued a rate formula for the period from January 1, 2018 through December 31, 2022. Pursuant to that decision, the rate for the mechanical rights and performance rights needed in connection with interactive streaming would have increased annually between 2018 and 2022. On August 11, 2020, the United States Court of Appeals for the District of Columbia Circuit concluded that the CRB failed to provide adequate notice of the rate structure it adopted, failed to explain its rejection of a past settlement agreement as a benchmark for going forward, and never identified the source of its asserted authority to substantively redefine a material term of its initial determination. For these reasons, the Court of Appeals overturned the CRB’s adopted rate structure and percentage rates and remanded the proceeding to the CRB for further proceedings. The CRB has proceedings underway to consider and address the Court of Appeals’ decision.

Failure to protect Sirius XM Holdings’ intellectual property or actions by third-parties to enforce their intellectual property rights could substantially harm its business and operating results.

Development of Sirius XM Holdings’ systems has depended upon the intellectual property that it has developed, as well as intellectual property licensed from third parties. If the intellectual property that Sirius XM Holdings has developed or used is not adequately protected, others will be permitted to and may duplicate portions of its systems or services without liability. In addition, others may challenge, invalidate, render unenforceable or circumvent Sirius XM Holdings’ intellectual property rights, patents or existing licenses or it may face significant legal costs in connection with defending and enforcing those intellectual property rights. Some of the know-how and technology Sirius XM Holdings has developed, and plans to develop, is not now, nor will it be, covered by U.S. patents or trade secret protections. Trade secret protection and contractual agreements may not provide adequate protection if there is any unauthorized use or disclosure. The loss of necessary technologies could require Sirius XM Holdings to substitute technologies of lower quality performance standards, at greater cost or on a delayed basis, which could harm Sirius XM Holdings.

Other parties may have patents or pending patent applications, which will later mature into patents or inventions that may block or put limits on Sirius XM Holdings’ ability to operate its system or license its technologies. Sirius XM Holdings may have to resort to litigation to enforce its rights under license agreements

 

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or to determine the scope and validity of other parties’ proprietary rights in the subject matter of those licenses. This may be expensive and Sirius XM Holdings may not succeed in any such litigation.

Third parties may assert claims or bring suit against Sirius XM Holdings for patent, trademark or copyright infringement, or for other infringement or misappropriation of intellectual property rights. Any such litigation could be costly, divert Sirius XM’s efforts from its business, subject it to significant liabilities to third parties, require it to seek licenses from third parties, block its ability to operate its services or license its technology, or otherwise adversely affect its ability to successfully develop and market its services.

Some of Sirius XM Holdings’ services and technologies may use “open source” software, which may restrict how Sirius XM Holdings uses or distributes its services or require that it release the source code subject to those licenses.

Sirius XM Holdings may incorporate in some products software licensed under “open source” licenses. Open source licenses often require that the source code be made available to the public and that any modifications or derivative works to the open source software continue to be licensed under open source licenses. Few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to uncertainty. In the event that portions of Sirius XM Holdings’ proprietary technology are determined to be subject to an open source license, Sirius XM Holdings may be required to publicly release portions of its source code, be forced to re-engineer all or a portion of its technologies, or otherwise be limited in the licensing of its technologies, each of which could adversely affect its ability to sustain and grow its business.

Rapid technological and industry changes and new entrants could adversely impact Sirius XM Holdings’ services.

The audio entertainment industry is characterized by rapid technological change, frequent product and feature innovations, changes in customer requirements and expectations, evolving standards and new entrants offering products and services. If Sirius XM Holdings is unable to keep pace with these changes, its business may not succeed. Products using new technologies could make Sirius XM Holdings’ services less competitive in the marketplace.

Sirius XM Holdings has a significant amount of indebtedness, and its debt contains certain covenants that restrict its operations.

As of September 30, 2022, Sirius XM Holdings had an aggregate principal amount of approximately $9.9 billion of indebtedness outstanding.

Sirius XM Holdings’ indebtedness increases its vulnerability to general adverse economic and industry conditions; requires it to dedicate a portion of its cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund capital expenditures, marketing and other general corporate activities; limits its ability to borrow additional funds; and may limit its flexibility in planning for, or reacting to, changes in its business and the audio entertainment industry.

If Sirius XM Holdings is unable to attract and retain qualified personnel, its business could be harmed.

Sirius XM Holdings believes that its success depends on its continued ability to attract and retain qualified management, sales, technical and other personnel. During 2021, Sirius XM Holdings experienced a significant amount of employee turnover. All of Sirius XM Holdings’ employees, including its executive officers, are free to terminate their employment with Sirius XM Holdings at any time, and their knowledge of its business may be difficult to replace.

Qualified individuals are in high demand, particularly in the media and technology industries, and Sirius XM Holdings may incur significant costs to attract and retain employees. If Sirius XM Holdings is unable to attract and retain its key employees, it may not be able to achieve its objectives, and its business could be harmed.

Sirius XM Holdings’ facilities could be damaged by natural catastrophes or terrorist activities.

An earthquake, hurricane, tornado, flood, cyber-attack, terrorist attack, civil unrest or other catastrophic event could damage Sirius XM Holdings’ data centers, studios, terrestrial repeater networks or

 

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satellite uplink facilities, interrupt its services and harm its business. Sirius XM Holdings also has significant operations in the San Francisco Bay Area, a region known for seismic activity. Natural disasters and adverse weather conditions can be caused or exacerbated by climate change.

Any damage to the satellites that transmit to Sirius XM Holdings’ terrestrial repeater networks would likely result in degradation of the affected service for some Sirius XM subscribers and could result in complete loss of Sirius XM satellite service in certain or all areas. Damage to Sirius XM Holdings’ satellite uplink facilities could result in a complete loss of its Sirius XM satellite service until it could transfer operations to suitable back-up facilities.

The unfavorable outcome of pending or future litigation could have an adverse impact on Sirius XM Holdings’ operations and financial condition.

Sirius XM Holdings is party to several legal proceedings arising out of various aspects of its business, including class actions arising out of its marketing practices. The outcome of these proceedings may not be favorable, and one or more unfavorable outcomes could have an adverse impact on its financial condition.

Sirius XM Holdings may be exposed to liabilities that other entertainment service providers would not customarily be subject to.

Sirius XM Holdings designs, establishes specifications, sources or specifies parts and components, and manages various aspects of the logistics of the production of satellite radios and its apps. As a result of these activities, Sirius XM Holdings may be exposed to liabilities associated with the design, manufacture and distribution of radios and apps that the providers of an entertainment service would not customarily be subject to, such as liabilities for design defects, patent infringement and compliance with applicable laws, as well as the costs of returned product.

Sirius XM Holdings’ business and prospects depend on the strength of its brands.

Maintaining and enhancing Sirius XM Holdings’ brands is an important part of its strategy to expand its base of subscribers, listeners and advertisers. Sirius XM Holdings’ brands may be impaired by a number of factors, including service outages, data privacy and security issues and exploitation of its trademarks by others without permission. Sirius XM Holdings’ ability to maintain and enhance its brands also depends in part on its ability to continue to develop and provide an innovative and high-quality entertainment experience, which Sirius XM Holdings may not do successfully.

Risks Relating to the New Formula One Group

Risks Relating to the Formula 1 Business

There could be a decline in the popularity of Formula 1, which may have a material adverse effect on Formula 1’s ability to exploit its commercial rights to the World Championship.

The success of Formula 1’s business and its ability to profitably renew or enter into beneficial new commercial arrangements, including race promotion, broadcasting and sponsorship contracts, is largely dependent upon the continued popularity of the Fédération Internationale de l’Automobile (FIA) Formula One World Championship (the World Championship). Similarly, the sponsorship and other revenue generation of the racing teams that participate in the World Championship (the Teams) are dependent on such continued popularity and, if such revenue decreased, it may impact their ability or willingness to continue participating in the World Championship. The popularity of Formula 1, globally and in particular countries and regions, may be influenced by competition from any rival championship and other forms of motor sport or similar entertainment which challenge Formula 1’s position and reputation as the pinnacle of world motor sport, the continued participation of the leading Teams, the perceived entertainment value of the World Championship, changes in societal views on automobiles more generally and an unfavorable economic climate which may discourage fans from attending World Championship events (Events) or make it more difficult to expand into new markets, all of which could change rapidly and cannot be predicted. Formula 1 also faces stiff competition from other live sporting events, and with sporting events delivered over television networks, radio, the Internet and online services, mobile applications and other alternative sources, as well as

 

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from the availability of alternative forms of entertainment and leisure activities. Formula 1 competes for attendance, viewership and advertising with a wide range of alternatives, such as top flight soccer leagues in many of its non-U.S. markets. As a result of the large number of options available, Formula 1 faces strong competition for the attention of sports fans.

Further, a scandal which undermines the credibility of the sport, such as a race fixing scandal, or accident could also impact the popularity of Formula 1. In particular regions, the popularity of the World Championship varies depending upon the participation and performance of drivers and Teams from that region. There is no assurance that Formula 1 will be able to compete effectively with other forms of sports or entertainment or that the World Championship will maintain its popularity either globally or in any particular country or region. Any decrease in the continued popularity of the World Championship may affect Formula 1’s ability to enter into or renew race promotion, broadcasting, advertising, sponsorship or other commercial agreements which may materially adversely affect Formula 1’s business, financial condition, results of operations and prospects, and in turn materially adversely impact the New Formula One Group.

Termination of the 100-Year Agreements could cause Formula 1 to discontinue its operations.

Under an agreement entered into by Formula 1 and the FIA in 2001, Formula 1 was granted an exclusive license with respect to all of the commercial rights to the World Championship, including its trademarks (the 100-Year Agreements). This license, which took effect on January 1, 2011 and expires on December 31, 2110, maintains Formula 1’s exclusive commercial rights to the World Championship which Formula 1 held under previous agreements with the FIA, among other things. The license under the 100-Year Agreements is critical to the ongoing operation of Formula 1’s business. Formula 1’s rights under these agreements can be terminated by the FIA if Formula 1 materially breaches the relevant agreements (with certain of such breaches subject to certain cure rights), undergoes an unpermitted change of control, interferes with certain of the FIA’s rights under the 100-Year Agreements or experiences certain insolvency events. If Formula 1’s license under the 100-Year Agreements was terminated in accordance with its terms or the FIA or another person successfully challenged the validity of that license (or the 100-Year Agreements as a whole), it could cause Formula 1 to discontinue its operations, lead to the termination of substantially all of Formula 1’s commercial contracts, prevent Formula 1 from exploiting the commercial rights to the World Championship and require Formula 1 to discontinue use of the World Championship trademarks and other intellectual property rights, which would materially adversely impact the New Formula One Group.

Teams may, in certain circumstances, terminate their existing commitment to participate in the World Championship until (and including) 2025 or breach their obligations and withdraw.

Formula 1’s ability to effectively stage the World Championship depends on the ongoing involvement of its participants. In 2021, Formula 1, the FIA and the Teams entered into an agreement governing the relationship between Formula 1, the FIA and the Teams, including the regulation of the World Championship (a Concorde Agreement), each of the current 10 Teams have committed to participate in the World Championship until December 31, 2025, subject to earlier termination upon the occurrence of certain events. Formula 1 cannot provide assurance that any of the Teams will commit to participate in the World Championship beyond 2025, or that the FIA will enter into a subsequent agreement beyond 2030. If any of the current Teams cease to participate in the World Championship, Formula 1 may attempt to encourage new entrants to the World Championship; however, there is no assurance Formula 1 will be able to do this. If such Teams were not replaced, it could result in fewer competitors in the World Championship as compared to recent seasons which may impact the perceived entertainment value of Events. In addition, any negotiation for an extension to the term of the Team Agreements or the Concorde Agreement could result in less favorable terms to Formula 1.

Even if a Team has committed to participate in the World Championship it may be able to exercise termination rights under the 2021 Concorde Agreement in certain circumstances and withdraw. It is also possible that Teams could form a rival motor sport series.

A lesser number of teams may reduce the popularity of Formula 1 which may affect its ability to enter into or renew race promotion, broadcasting, advertising, sponsorship or other commercial agreements, which may materially and adversely affect Formula 1’s business, financial condition, results of operations and prospects, and in turn may materially adversely impact the New Formula One Group.

 

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The FIA may take actions which are not in Formula 1’s interest.

The FIA is the governing body of the World Championship and a party to the 100-Year Agreements and to a Concorde Implementation Agreement entered into in 2013 (the Concorde Implementation Agreement). In its capacity as the governing body of the World Championship, the FIA must place safety and other sporting concerns over Formula 1’s commercial interests. As a result, the FIA may take actions with respect to safety and sporting standards and regulations which conflict with Formula 1’s interests as the commercial rights holder, including by increasing the cost to Teams of participating in the World Championship, diminishing the visual and sonic spectacle of Events, imposing fines on or excluding Teams, cancelling or delaying an Event, withholding approval for the staging of an Event, a new circuit or Formula 1’s proposed season calendar or establishing regulations without the support of the Teams. As a party to the 100-Year Agreements and the 2021 Concorde Governance Agreement, the FIA has certain rights and limitations and the exercise or purported exercise of the FIA’s rights thereunder may conflict with Formula 1’s interests. Any actions taken by the FIA which conflict with Formula 1’s interests may adversely impact Formula 1’s operations and revenue, and in turn may materially adversely impact the New Formula One Group.

Formula 1 may be subject to enforcement actions under competition laws.

Following an investigation by the European Commission (the EC) in 1999 in relation to Formula 1’s compliance with competition laws, Formula 1 modified certain of its business practices and changed the terms of a number of Formula 1’s commercial contracts. Following these modifications and changes, the EC issued two comfort letters to Formula 1 in October 2001 stating that Formula 1 was no longer under investigation. Comfort letters are not binding on the EC and if it believes there has been a material change in circumstances, it could take further enforcement action. The EC issued a press release in October 2003 stating that it was satisfied that Formula 1 had complied with the modified practices and terms that had led to its issuing its comfort letters and that it had ended its monitoring of Formula 1’s compliance. In adopting practices and concluding commercial contracts (including as to contracts with broadcasters (and the manner in which these rights are offered), contracts with Teams and contracts with promoters), Formula 1 takes into account the modified practices that formed the basis of the EC’s comfort letters.

Formula 1 is also required to comply with general European Union (E.U.) and national competition laws, which require Formula 1 at all times to ensure its business practices and agreements are consistent with the operation of competitive markets. Failure to comply with the relevant practices, terms, laws and rules can give rise to challenges by the EC, national competition regulators and other interested parties. In addition, they could cause or deem certain of Formula 1’s commercial contracts (including the Team Agreements) to be unenforceable in whole or in part and/or require various terms (including duration, scope and exclusivity) to be modified, and/or Formula 1 could be liable for damages or other sanctions.

Formula 1 has sought to adopt practices and conclude commercial contracts that take into account competition law as it applies to the specific nature of Formula 1’s sporting and entertainment businesses, Formula 1’s role within those businesses and the roles of the counterparties to Formula 1’s commercial contracts. However, given the uncertainty of the law in this area, and the possibility of third parties instigating action, there is a risk of further EC investigations, challenges or proceedings against Formula 1. For example, two Teams made a complaint against Formula 1 to the EC in September 2015 regarding the distribution of a Formula 1 prize fund and current sporting governance arrangements (though Formula 1 rejected the complaint as being without merit and believed it was in any event, a commercial dispute and not one that involved any breach of competition law). Although this particular complaint was withdrawn by the two Teams in early 2018, for the reasons set out above, no assurance can be given that there will be no future EC investigations, challenges or proceedings regarding unasserted matters.

Any of the foregoing could materially and adversely affect Formula 1’s business, financial condition, results of operations and prospects, which in turn could materially adversely impact the New Formula One Group.

Formula 1 may be unable to renew, replace or renegotiate on favorable terms one or more of Formula 1’s race promotion, broadcasting or sponsorship contracts.

Formula 1’s race promotion, broadcasting and sponsorship contracts typically have terms of three to seven years, three to five years and three to five years, respectively, but may on occasion be of longer duration.

 

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When these contracts expire, Formula 1 may not be able to renew or replace them with contracts on similar terms or at all. Further, counterparties to Formula 1 contracts may seek to terminate or renegotiate them, and Formula 1 may not be able to replace terminated contracts with contracts on similar terms or at all or renegotiate contracts on terms that are as favorable to us. Formula 1’s ability to renew, replace or renegotiate its contracts on similar terms, or at all, is dependent on a number of factors which Formula 1 may not be able to control or predict including the popularity of Formula 1, the value of live sports rights generally, relevant regulations, economic conditions in the relevant countries and the spending capacity and priorities of Formula 1’s counterparties. Additionally, many of Formula 1’s race promotion and broadcasting contracts are directly or indirectly with, or guaranteed by, governmental bodies or agencies and a change in their spending capacity or priorities could impact Formula 1’s negotiations with them. A failure to renew, replace or renegotiate Formula 1’s existing contracts on similar or improved terms could result in, among other things, the cancellation of an Event, the payments Formula 1 receives decreasing, the term of the contracts being shortened, termination rights being granted to Formula 1’s counterparties and other contractual terms and conditions being introduced which could materially and adversely affect Formula 1’s business, financial condition, results of operations and prospects, and in turn could materially adversely impact the New Formula One Group.

Formula 1 is exposed to credit-related losses in the event of non-performance by counterparties to Formula 1’s key commercial contracts.

Future payments under Formula 1’s core commercial contracts, including Formula 1’s race promotion, broadcasting and sponsorship contracts are typically made periodically over the course of several years. Formula 1’s ability to generate cash flow is heavily dependent on collecting amounts owed to it under these contracts. A change in the credit quality of one or more of Formula 1’s counterparties over the term of their contract with Formula 1 may increase the risk of non-payment. Certain of Formula 1’s counterparties are directly or indirectly governments or agencies thereof, some of which have recently experienced a deterioration in their credit quality. Formula 1 may also generally experience difficulties or be unable to recover payments owed to it by governments or agencies thereof because of their sovereign or semi-sovereign status. Additionally, an appreciation of the US dollar against the functional currencies of Formula 1’s counterparties increases the risk of non-payment. The failure of one or more of Formula 1’s counterparties to pay outstanding amounts owed to it could have a material adverse effect on Formula 1’s cash flows and results of operation, and in turn could materially adversely impact the New Formula One Group.

Potential challenges by tax authorities in the jurisdictions in which Formula 1 operates could adversely affect Formula 1’s financial results and position and in turn, the New Formula One Group.

Formula 1’s taxes are based upon the applicable tax laws and tax rates in effect in the jurisdictions in which it operates and upon the nature of Formula 1’s business arrangements and activities with and in such jurisdictions. When computing its tax obligations in these jurisdictions, Formula 1 endeavors to apply national and international tax rules consistently and in accordance with generally accepted interpretations and practice. However, such rules, and their application to Formula 1’s business, may not be entirely clear in all cases and may be interpreted differently by the applicable tax authorities. There can be no assurance that, upon review of Formula 1’s positions, the applicable tax authorities will agree with such positions. If a tax authority successfully challenges Formula 1’s positions with respect to its business arrangements, intercompany pricing policies, or the taxable presence of subsidiaries in certain jurisdictions, or if Formula 1 loses a material tax dispute in any jurisdiction, then Formula 1 may be exposed to additional tax liabilities and penalties, which may adversely affect its financial condition, results of operations and prospects, and in turn may materially adversely impact the New Formula One Group.

Changes in tax laws could adversely affect Formula 1 and the New Formula One Group.

Formula 1 operates in various jurisdictions and is subject to changes in applicable tax laws, treaties, or regulations in those jurisdictions. A material change in the tax laws, treaties, or regulations, or their interpretation, of any jurisdiction with which Formula 1 does business, or in which Formula 1 has significant operations, could adversely affect Formula 1.

For example, during October 2021, the Organisation for Economic Cooperation and Development (the OECD) announced that 136 countries and tax jurisdictions have agreed to implement a new “Two Pillar”

 

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approach to international taxation. The first detailed draft rules under that approach were published in December 2021. The new approach is expected to come into effect for the first time in 2023, although different countries are likely to implement the necessary rules at different times and in different ways, through their individual agreement to tax treaty changes and through changes to their own domestic tax laws.

The first pillar will first establish a new taxing right for countries in which a business has a significant economic presence, even though it may not have the degree of physical presence in that country needed to establish a taxing right under existing tax treaties. This new taxing right is subject to several conditions, exclusions and exceptions, and will initially affect only multinational enterprises with global turnover above 20 billion euros.

The second pillar will establish a Global Minimum Tax Rate of 15%, such that multinational enterprises with an effective tax rate in a jurisdiction below this minimum rate will need to pay additional tax, which could be collected by the parent company’s tax authorities or by those in other countries, depending on whether and how each country implements the OECD’s approach in its tax treaties and domestic tax legislation.

Depending on how the jurisdictions in which Formula 1 operates, and those in which Liberty and its subsidiaries are based, choose to implement the OECD’s approach in their tax treaties and domestic tax laws, Formula 1 could be adversely affected due to its income being taxed at higher effective rates, once these new rules come into force.

Formula 1 may face difficulties expanding into new markets, including as a result of being unable to attract race promoters for new Events.

Formula 1 has recently staged Events in a number of new markets and intends to explore further opportunities for expansion. Attracting the relevant race promoters to the World Championship in these markets on terms that are attractive to Formula 1 will be largely dependent on the popularity of the Formula 1 brand in these markets and Formula 1’s perceived ability to deliver the benefits that race promoters desire, such as publicity for the host city/region, economic impact or tourism. Additionally, Formula 1 may have difficulties entering into agreements with race promoters that have the necessary resources and experience to obtain all the necessary FIA, governmental and sporting approvals and successfully stage an Event. Events in new markets also require significant investments in circuit infrastructure and other administrative costs by Formula 1’s race promoters which may not be recouped and may generate fees below those received from Formula 1’s Events staged in more developed markets. In addition, under the 2021 Concorde Agreement, the consent of 70% of the Teams is required if there are more than 24 Events in a season or if there are fewer than 8 Events across Europe and North America combined. Also, under the 100-Year Agreements as amended by the 2013 Concorde Implementation Agreement, Formula 1 must obtain the FIA’s approval to stage more than 25 Events (or beginning in 2031, more than 17 Events unless the FIA and Formula 1 make a new agreement on this point), and there is no assurance such approval will be obtained.

Formula 1’s business is subject to laws and regulations including with respect to advertising, broadcasting and the environment, and changes in and judicial interpretations of such laws and regulations could have a material adverse effect on Formula 1 and the New Formula One Group.

Formula 1’s business is subject to laws and regulations including advertising, broadcasting, environmental and health and safety laws and regulations. Such regimes are subject to periodic governmental review, legislative initiatives and judicial interpretations, any of which could adversely affect Formula 1’s business and its profitability. A substantial part of Formula 1’s, broadcasters’ and the Teams’ revenue come from sponsorship contracts. If new restrictions or bans on advertising specific products or services which are advertised in Formula 1 are introduced, it may reduce Formula 1 or the Teams’ sponsorship revenue or advertising revenue of Formula 1’s broadcasters, which in turn may reduce the value of Formula 1’s broadcasting contracts and impact the Teams’ desire to continue participating in Formula 1. For example, advertising of alcohol is restricted in certain countries where Events are held. Advertising laws could also be introduced which prevent the broadcast of images which include a restricted brand, thereby preventing Formula 1 from licensing the television rights in an affected country. Additionally, as Formula 1 expands into new markets, local customs, practices and cultural sensitivities may require Formula 1 and the Teams to restrict advertising certain products even if not required by law. Broadcasting laws could be introduced which require that Events be broadcast only on free-to-air television which would prevent Formula 1 from

 

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entering into pay television contracts in the relevant jurisdiction. Additionally, judicial decisions or other governmental action could interfere with the manner in which Formula 1 exploits its broadcasting rights, including in relation to Formula 1’s segmentation of such rights among different geographic regions. Environmental laws could also be introduced which place limits on engine design and Event activities. Motor sport has also been banned in certain countries. For example, Switzerland banned motor sport from 1955 to 2007 following an accident at the 24 Hours of Le Mans that killed spectators and a driver. A ban on motor sport in any country where Formula 1 holds an Event could result in a reduction in Formula 1’s revenue and as a consequence, may materially and adversely affect Formula 1’s business, financial condition and prospects, which in turn may materially adversely impact the New Formula One Group.

The new economic and security relationship between the U.K. and the E.U. following Brexit could have a material adverse effect on the Formula 1 business.

Following the withdrawal of the U.K. from the E.U., commonly referred to as “Brexit,” the European Commission reached a trade agreement with the U.K. on the terms of its future cooperation with the E.U., effective as of January 1, 2021 (the Trade Agreement). The Trade Agreement offers U.K. and E.U. companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas; however, economic relations between the U.K. and the E.U. are now more restricted than they were previously. The Trade Agreement does not incorporate the full scope of the services sector, and businesses such as banking and finance face a more uncertain future. The U.K. and E.U. put in place a separate memorandum of understanding in March 2021, creating a framework for dialogue between the U.K. and the E.U. on financial services regulation.

As Formula 1 operates its business principally through U.K.-based subsidiaries and a number of Events take place within the E.U., Brexit and the terms of the Trade Agreement may have negative impacts that could adversely affect the Formula 1 business, financial condition and operating results. Liberty Media will therefore continue to monitor any effects of Brexit and the Trade Agreement on Formula 1 operations, and to identify appropriate mitigating actions to prevent significant disruption to Formula 1 business operations.

Events beyond Formula 1’s control may cause one or more events to be cancelled or postponed or prevent Formula 1 from providing an international television feed, each of which could result in the loss of revenue under Formula 1’s commercial contracts.

An Event may have to be postponed or cancelled, or Formula 1 may be unable to provide an international television feed of an Event, due to factors beyond its control, including an inability to transport Formula 1’s and the Teams’ equipment to an Event, power failures, parties to Formula 1 race promotion contracts terminating those contracts, embargoes or sanctions, cancellation of large-scale public events by a competent authority due to a security or terrorism risk or outbreak of disease, which could result in the loss of revenue under Formula 1’s commercial contracts. Most recently, due to the COVID-19 pandemic, a number of Events were cancelled and/or replaced during the 2021 and 2020 seasons. Whether a race promoter is required to pay Formula 1 the race promotion fee with respect to an Event that is cancelled due to any factor beyond the control of Formula 1 depends on the terms and provisions of the applicable promoter agreement. In addition, Formula 1’s broadcast contracts include a provision to reduce the fee payable to Formula 1 if there are fewer than a specified number of Events in a season for reasons other than a force majeure event. The minimum number of Events varies by broadcast contract but is typically between 14 and 16 Events. However, if an Event were to be cancelled due to the race promoter failing to meet its obligations under the race promotion contract, then Formula 1 may be entitled to indemnification from the race promoter for any lost media rights revenue. If an Event is not held, cancelled or does not receive international television coverage (for example, as a result of a technical problem), Formula 1’s fees under the relevant sponsorship contract are likely to be reduced unless the sponsorship contract allows Formula 1 to substitute another Event for the cancelled Event and Formula 1 does so. If an Event is cancelled, Formula 1 will also be required to refund amounts paid under other arrangements, including amounts paid for tickets to the Paddock Club, the principal high end corporate hospitality offering at certain Event weekends.

Accidents during Events may cause losses that are not covered by insurance, disrupt an Event and cause Formula 1 reputational damage.

Racing accidents occur in Formula 1 and its support races. The last racing accident to cause the death of a driver was in 2019 during a Formula 2 support race at the Belgian Grand Prix and there have also been

 

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two fatalities involving race marshals since 1994. Fatal accidents, particularly if they involve public spectators, could damage the reputation of Formula 1 and decrease its popularity, any of which could have a material adverse effect on Formula 1. Accidents can also result in the cancellation of a practice or qualifying session or a race. Additionally, persons harmed in any accident could seek compensation from Formula 1. Formula 1 and its promoters purchase insurance coverage for each Event. However, there can be no assurance that such insurance policies will provide adequate coverage at all times and in all circumstances. If Formula 1 is held liable for damages beyond the scope of the insurance coverage available to Formula 1 (including the insurance contract procured by the race promoter to include coverage for Formula 1), Formula 1’s business, financial condition and results of operations could be materially and adversely affected, which in turn could materially adversely affect the New Formula One Group.

Terrorist acts during Events may cause Formula 1 damage and losses that are not covered by insurance.

Formula 1 is a high profile sport with a global fan base and Events are attended by a large number of spectators. An Event, like any other major sporting event, could be the target of an actual or threatened terrorist act, either of which could disrupt Formula 1 and lead to the cancellation of Events, increase security requirements and result in a decline of spectator attendance at Events. Additionally, persons harmed in any terrorist act may attempt to seek compensation from Formula 1. The general risk of a terror attack has increased recently in a number of the countries in which Events are held. Formula 1 purchases annual insurance policies covering all Events, and individual race promoters purchase insurance coverage for their own Events under which Formula 1 is also covered, which provide coverage for third party liability covering personal injury, equipment and property damage. However, there can be no assurance that this insurance will be adequate at all times and in all circumstances. Terrorism is expressly excluded from the public liability coverage arranged by the race promoters, although Formula 1’s own insurance policies cover both its broadcast and Event systems equipment and its employer and public liabilities exposures for terrorism risks. If Formula 1 is held liable for damages beyond the scope of the insurance coverage (its own and that arranged by the race promoter) and/or is unable to obtain indemnification from the relevant insurer(s), Formula 1’s business, financial condition and results of operations could be materially and adversely affected, which in turn could materially adversely affect the New Formula One Group.

Rival motor sport events could be established involving existing Teams or different teams, or existing Teams may divert their resources to participate in another motor sport event, which could lead to fewer Teams and race circuits being involved in Formula 1, or a Team’s primary engagement in motor sport being in another motor sport event, either of which could diminish the competitive position of Formula 1.

In the future, it is possible that a rival motor racing series similar to Formula 1 could be established, involving existing Teams and/or different teams or an existing motor sport event could become more popular and become a rival series to Formula 1. Such a rival series could lead to fewer Teams and race circuits in Formula 1, reduce the budget that a Team is willing to spend on its participation in Formula 1, or diminish the competitive position of Formula 1 and have a material adverse effect on Formula 1’s results of operations and business and the New Formula One Group. In addition, certain of Formula 1’s commercial contracts could be terminated if Formula 1 ceased to be the premier motor racing series for open wheel single-seater cars. Pursuant to the 2021 Concorde Agreement, each of the 10 Teams have committed to participate in the World Championship until December 31, 2025. If a rival motor racing series is established (or if an existing series develops into a rival series), this may reduce the popularity of Formula 1 leading to a decline in the value of Formula 1’s commercial contracts which may materially adversely affect Formula 1’s business, financial condition, results of operations and prospects, and in turn may materially adversely affect the New Formula One Group.

Changes in consumer viewing habits and the emergence of new content distribution platforms could adversely affect Formula 1’s business and the New Formula One Group.

The manner in which consumers view televised sporting events is changing rapidly with the emergence of alternative distribution platforms. Digital cable, internet and wireless content providers are continuing to improve technologies, content offerings, user interface, and business models that allow consumers to access video-on-demand or internet-based tools with interactive capabilities including start, stop and rewind. Formula 1’s exclusive commercial rights place no limits on the platforms on which it can operate, including

 

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online. However, such developments may impact the profitability or effectiveness of Formula 1’s existing licensing practices and there is no guarantee that Formula 1 will be successful in adapting its licensing practices and/or media platform as consumer viewing habits change. If Formula 1 is unsuccessful in adapting its licensing practices and/or media platform as consumer viewing habits change, Formula 1’s viewership levels (whether on traditional or new platforms) may decrease and/or its licensing practices may become less profitable leading to the possibility of a reduction in the value of its broadcasting and sponsorship contracts. Any reduction in the value of Formula 1’s commercial rights and/or contracts may materially and adversely affect its revenue, business, financial condition, results of operations and prospects, which in turn may materially adversely affect the New Formula One Group. While Formula 1’s monetization of its television rights has increased in recent years, there can be no assurance that such increases will continue or that Formula 1’s level of such monetization will be comparable to that of other sporting events.

If confidential information regarding Formula 1’s business arrangements is disclosed or leaked, it could affect Formula 1’s relationships with counterparties and/or Teams and result in less favorable commercial contracts and adversely affect Formula 1’s business and the New Formula One Group.

The success of Formula 1’s business depends on maintaining good relationships with Formula 1’s counterparties (including race promoters, broadcasters and sponsors) and the Teams and entering into race promotion, broadcasting, sponsorship and other commercial contracts on favorable terms. If confidential information regarding Formula 1’s business arrangements with its counterparties and/or the Teams were to be disclosed or leaked, it could harm Formula 1’s relationships with those parties and result in less favorable terms in its commercial contracts, including with respect to pricing and adversely affect its business, results of operation, financial condition and prospects, which in turn could materially adversely affect the New Formula One Group.

Formula 1 depends on trademarks, copyrights and intellectual property.

Formula 1 relies on certain trademarks, copyrights and other intellectual property to protect its rights, including its brands, logos and television footage. The existence of complex factual and legal issues may give rise to uncertainty as to the validity or subsistence, scope and enforceability of a particular trademark, copyright or other intellectual property or contractual right in a particular jurisdiction. While historically Formula 1 has been widely transmitted by free-to-air television which reduced its attractiveness as a target for piracy and other infringement, Formula 1 is increasingly transmitted by pay TV operators that are greater targets for piracy. In any event, Formula 1’s intellectual property, and in particular the Formula 1 brand (including the F1 logo) and television footage are potential targets for counterfeiting, piracy and other infringement. New technologies such as the convergence of computing, communication, and entertainment devices, the falling prices of devices incorporating such technologies, increased broadband internet speed and penetration and increased availability and speed of mobile data transmission have made the unauthorized digital pirating and distribution of televised sporting events easier and faster and enforcement of intellectual property rights more challenging. The unauthorized use of intellectual property in the entertainment industry generally continues to be a significant challenge for intellectual property rights holders. If Formula 1 is unsuccessful in preventing widespread piracy and illegal live streaming of Events in the future, these activities could result in lost revenue and a reduction in the value of Formula 1’s broadcasting rights which may materially and adversely affect Formula 1’s business, results of operation, financial condition and prospects, and in turn may materially adversely affect the New Formula One Group.

The terms of Formula 1’s indebtedness may limit its financial and operating flexibility.

Covenants contained in the agreements governing Formula 1’s credit facilities will restrict the ability of its subsidiaries to, among other things:

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incur or guarantee additional indebtedness or be a creditor in respect of financial indebtedness;

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pay dividends, redeem their share capital, purchase capital stock, make investments or other restricted payments;

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make any payment in respect, or on account of, indebtedness owing to Delta Topco or certain of its affiliates;

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in certain circumstances, make any payment or distribution in respect, or on account of, intra-group debt;

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issue or sell capital stock;

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acquire assets or make investments;

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sell assets (including capital stock of subsidiaries);

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create liens;

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enter into sale and leaseback or finance lease transactions;

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acquire an interest in or invest in any joint venture;

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enter into transactions with stockholders or affiliates except on arm’s length terms for full market value, including in relation to the provision of goods or services;

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enter into any contractual or similar restriction which restricts their ability to pay dividends or other distributions, make intra-group loan repayments, loan repayments or loans;

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effect a consolidation or merger;

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amend material commercial contracts; and

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enter into derivative transactions in respect of exposures which are unconnected to Formula 1’s credit facilities.

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In addition, those covenants restrict certain holding companies in Formula 1 from trading, carrying on business, owning assets or incurring liabilities.

Formula 1 may also be required to repay its credit facilities upon the occurrence of certain events and Formula 1 cannot give any assurance that it will be able to finance such a repayment. Failure to comply with an obligation to repay the credit facilities would result in an event of default which could have a material adverse effect on Formula 1 and the New Formula One Group.

These restrictive covenants could limit Formula 1’s ability to pursue Formula 1’s growth plans, restrict Formula 1’s flexibility in planning for, or reacting to, changes in Formula 1’s business and industry and increase Formula 1’s vulnerability to adverse economic and industry conditions. Formula 1 may enter into additional financing arrangements in the future, which could further restrict Formula 1’s flexibility.

Fluctuations in the value of the US dollar against the functional currencies of Formula 1’s business and Formula 1’s counterparties’ business could adversely affect Formula 1’s profitability and the New Formula One Group.

In 2021, a significant proportion of Formula 1’s revenue and costs were denominated in U.S. dollars. Formula 1 also operates in a number of other currencies, most notably the pound sterling and Euro. There may be a mismatch between the amount of a local currency Formula 1 generates in revenue and incurs in expenses. Liberty Media’s financial statements translate local currency transactions into U.S. dollars. Formula 1 occasionally uses derivatives to hedge its exposure to more significant foreign currency risk. There is no assurance that such measures will be successful and fluctuations in the value of the U.S. dollar against Formula 1’s functional currencies could affect its profitability. Additionally, most payments Formula 1 receives from Formula 1’s counterparties under Formula 1’s commercial contracts are denominated in U.S. dollars while their revenue is typically denominated in other currencies, most notably the Euro or the local currency in the country where the relevant Event is held. An appreciation of the U.S. dollar, against the functional currencies of Formula 1’s counterparties whose revenue is denominated in a currency other than U.S. dollars, increases the cost of their payments to Formula 1 in their functional currencies and the risk that they will not make their payments to Formula 1 or cause them to request Formula 1 to enter into a new contract with such counterparty, which could affect Formula 1’s profitability and financial position, and in turn could impact the New Formula One Group.

Formula 1 is reliant upon the retention of certain key personnel and the hiring of strategically valuable personnel, and Formula 1 may lose or be unable to hire one or more of such personnel.

Formula 1’s commercial success is dependent to a considerable extent on the abilities and reputation of Formula 1’s management. Formula 1’s senior management team has a wealth of experience both in Formula 1

 

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and in the media sector more widely. Chase Carey, Formula 1’s former Chairman and Chief Executive Officer and current non-Executive Chairman, is a well-known and respected senior figure in the media industry and led Formula 1 in its growth and expansion from Liberty’s acquisition of the business in 2017 through the end of 2020. In January 2021, Mr. Carey was succeeded as Chief Executive Officer by Stefano Domenicali, who brings his history of success in Formula 1 racing at Ferrari and the broader auto industry at Audi and Lamborghini. Formula 1’s Chief Financial Officer, Duncan Llowarch, and the General Counsel, Sacha Woodward Hill, have 25 years and 26 years of experience in Formula 1, respectively, and Ross Brawn, Managing Director of Motor Sports, has over 40 years of experience in motor racing, holding senior positions in several leading Formula 1 teams including his own, Brawn GP, which won the Formula 1 Constructors’ title in 2009. While Formula 1 has the benefit of a strong management team and contracted revenue which provide Formula 1 stability in the near term, the voluntary departure of any key personnel could disrupt Formula 1’s operations and have a material adverse effect on Formula 1’s business and results of operations, which in turn could materially adversely impact the New Formula One Group. Liberty and Formula 1 continue to take steps to hire new members of management for the Formula 1 team as Liberty continues to expand the Formula 1 business. If Liberty Media and Formula 1 are unable to make strategic hires to strengthen the management of Formula 1, or if Liberty and Formula 1 are unable to retain these strategic hires over the long-term, the Formula 1 business may suffer.

The Teams have certain governance rights under the 2021 Concorde Agreement that may limit or, at a minimum, influence actions that Liberty may seek to cause Formula 1 to take.

The Teams are entitled to certain consent rights under the 2021 Concorde Agreement, including in relation to the number of Events in a season exceeding 24 or if there are fewer than 8 Events across Europe and North America combined and the introduction of new sporting and technical regulations applying to the World Championship. The interests or opinions of the Teams with regard to certain actions proposed to be taken by Formula 1 may differ from those of Liberty. In such event, the Teams may be able to block these actions.

Risks Relating to the Liberty Live Group

Liberty Media does not have the right to manage its business affiliate, Live Nation, which means Liberty Media is not able to cause Live Nation to operate in a manner that is favorable to Liberty Media.

Liberty Media does not have the right to manage the businesses or affairs of its business affiliate Live Nation, which is to be attributed to the Liberty Live Group. Rather, Liberty Media’s rights take the form of representation on the board of directors and board committees of Live Nation. Although Liberty Media’s board representation rights may enable it to exercise influence over the management or policies of Live Nation, such representation will not enable Liberty Media to cause Live Nation to take any actions Liberty Media believes are favorable to it (such as paying dividends or distributions).

Liberty Media’s equity method investment in Live Nation may have a material impact on net earnings of Liberty Media and the Liberty Live Group.

Liberty Media has a significant investment in Live Nation that is to be attributed to the Liberty Live Group, which Liberty Media accounts for under the equity method of accounting. Under the equity method, Liberty Media reports its proportionate share of the net earnings or losses of Liberty Media equity affiliates in its statement of operations under “share of earnings (losses) of affiliates,” which contributes to Liberty Media’s earnings (loss) from continuing operations before income taxes. Due to the impact of COVID-19, Live Nation recorded significant losses during the years ended December 31, 2021 and 2020. If the earnings or losses of Live Nation are material in any year, those earnings or losses may have a material effect on Liberty Media’s net earnings or losses and those to be attributed to the Liberty Live Group. Notwithstanding the impact on Liberty Media’s net earnings or losses and those to be attributed to the Liberty Live Group, Liberty Media does not have the ability to cause Live Nation to pay dividends or make other payments or advances to its stockholders, including Liberty Media. In addition, Liberty Media’s investment in Live Nation is in publicly traded securities, which is not reflected at fair value on Liberty Media’s balance sheet and is subject to market risk that is not directly reflected in Liberty Media’s statement of operations.

 

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The business of Live Nation is subject to a number of risks and uncertainties, including many of which are similar to those above with respect to Sirius XM Holdings, such as:

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“Sirius XM Holdings faces substantial competition and that competition is likely to increase over time;”

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“Sirius XM Holdings relies on third parties for the operation of its business, and the failure of third parties to perform could adversely affect its business;”

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“If Sirius XM Holdings fails to protect the security of personal information about its customers, it could be subject to costly government enforcement actions and private litigation and its reputation could suffer;”

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“Interruption or failure of Sirius XM Holdings’ information technology and communications systems could impair the delivery of its service and harm its business;” and

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“Failure to protect Sirius XM Holdings’ intellectual property or actions by third-parties to enforce their intellectual property rights could substantially harm its business and operating results.”

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this joint proxy statement/prospectus or in the documents incorporated by reference herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including certain statements relating to the completion of the Split-Off and the Reclassification, the timing of the Split-Off and Reclassification, the terms of the proposed attribution of certain assets and liabilities among the New Liberty SiriusXM Group, New Formula One Group and Liberty Live Group, the realization of expected benefits from the Split-Off and Reclassification, Liberty Media and SplitCo’s business, product and marketing strategies, market potential, future financial performance and other matters that are not historical facts with respect to Liberty Media, SplitCo and their respective subsidiaries arising in the ordinary course of business. In particular, statements in the “Questions and Answers,” “Risk Factors,” “The Proposed Transactions,” “The Split-Off Proposal,” “The Reclassification Proposals,” “U.S. Federal Income Tax Consequences,” “Description of SplitCo Business,” and “Annex D: Attributed Financial Information Of Liberty Media” contain forward-looking statements. Where, in any forward-looking statement, Liberty Media or SplitCo expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In addition to the risk factors described herein under “Risk Factors,” the following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

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Liberty Media and SplitCo’s respective abilities to recognize anticipated benefits from the Split-Off and the Reclassification;

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the possibility that Liberty Media may be unable to obtain stockholder approvals required for the Split-Off and/or the Reclassification;

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the possibility that the businesses of Liberty Media and SplitCo may suffer as a result of uncertainty surrounding the Split-Off and the Reclassification;

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the possibility that the Split-Off and the Reclassification may have unexpected costs;

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the impact of the COVID-19 pandemic and local, state and federal governmental responses to the pandemic on the economy and Liberty Media’s and SplitCo’s customers, vendors and businesses generally;

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Liberty Media and SplitCo’s ability to obtain additional financing on acceptable terms and cash in amounts sufficient to service debt and other financial obligations;

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Liberty Media, SplitCo and their respective subsidiaries’ indebtedness could adversely affect operations and could limit the ability of such subsidiaries to react to changes in the economy or their industry;

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the success of SplitCo and the businesses attributed to each of the Liberty Media tracking stock groups;

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Liberty Media, SplitCo and their respective subsidiaries’ ability to realize the benefits of acquisitions or other strategic investments;

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the impact of inflation and weak economic conditions on consumer demand for products, services and events offered by SplitCo and the businesses attributed to each of Liberty Media’s tracking stock groups;

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the outcome of pending or future litigation or investigations;

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the operational risks of SplitCo and Liberty Media’s subsidiaries and business affiliates with operations outside of the United States;

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SplitCo and Liberty Media’s ability to use net operating loss, disallowed business interest and tax credit carryforwards to reduce future tax payments;

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the ability of Liberty Media, SplitCo and their respective subsidiaries and business affiliates to comply with government regulations, including, without limitation, Federal Communications

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Commission (FCC) requirements, consumer protection laws and competition laws, and adverse outcomes from regulatory proceedings;

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the regulatory and competitive environment of the industries in which SplitCo, Liberty Media, and the entities in which Liberty Media has interests, operate;

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changes in the nature of key strategic relationships with partners, vendors and joint venturers;

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the impact of organized labor on SplitCo;

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the impact of an expansion of Major League Baseball;

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the level of broadcasting revenue that Braves Holdings receives;

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the impact of the Development Project on SplitCo and its ability to manage the project;