Barry Diller and his longtime partner, John Malone, have been playing financial footsie for so long that most market watchers find it hard to get excited about any news from them these days. Except when it gets personal, that is. Last year in the Wall Street Journal, Malone sniped that, “There was time when there was, I think, a 20% Barry premium on Wall Street. Today you could argue there is a Barry discount.” Ouch.

And this past Saturday, Malone bought on the Diller Discount: He snapped up an additional 14 million shares of IAC Interactive, the $18 billion company Diller built with his backing. The move raised his stake to 30 percent of the company from 24.1 percent, and gave Malone a small but significant edge over Diller (who still owns 27.2 percent).

Diller’s latest move came in November, when he announced that he would chop up IAC, which has always been a mere hodge-podge of Internet outfits, into five public companies. The stock jumped 7.5 percent as a result. It always did baffle the mind to try to understand just why Match.com, Home Shopping Network, and Ticketmaster belonged under the same roof, other than the obvious rationale of having enough bulk to justify Diller’s absurd pay levels year after year.

These machinations lay bare a game that the rest of us mere mortals are not invited to, the one called financial engineering. Their backroom deals and complicated financial structures and asset swaps make the head spin, and that’s what they’re supposed to do: While we’re all busy trying to figure out just who owns what, somebody’s pockets are being lined with cash. While most stories characterize the two as combatants, that’s missing the bigger picture: They’re on the same team, and it’s the rest of their shareholders that are on the losing side.

Could Malone really not find any bargains in the stock market other than IAC itself? A bank, perhaps? Sure, he could. But why would he pass up the chance to turn up the heat on Diller? Way back before he was his own man, Diller suckled at Malone’s teat of financial obfuscation. Perhaps the old coot is merely signaling to his protégé that he’s not ready to hand over the keys to the kingdom yet. —Duff McDonald

Stake Is Bought In IAC/InterActiveCorp [NYT]
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