In his first media appearance since taking a public stand on Sirius XM, activist investor Ralph Nader (yes, that Ralph Nader) says John Malone is making a lowball bid for the company and has ulterior motives.
When it comes to activist investors, the first names that pop up are the likes of Carl Icahn, Bill Ackman, Dan Loeb, and… Ralph Nader?
That's right, Ralph Nader, the man who changed the course of American history with his runs for president.
One of the nation’s best-known political activists famous for his fights against large corporations is also an activist investor in large corporation fighting for shareholder value. For example, a few years ago, he challenged Cisco to increase its dividend payments to stockholder.
Now Nader has a new corporate head in his sights: John Malone, the chairman of Liberty Media. Nader believes Liberty Media is trying to lowball Sirius XM investors with a bid of $3.68 per share.
And that has Ralph Nader mad.
In an exclusive interview with Talking Numbers – and his first since taking a public position on Sirius XM - Nader slams Malone's offer, saying Liberty Media is trying to take over Sirius XM cheaply so he can get at the company's cash and buy Time Warner Cable. Liberty Media currently owns about 53% of Sirius XM.
A shareholder in Sirius XM, Nader says Malone's $3.68 offer is just too low given the company's recent performance.
"It's recording better results every quarter," says Nader. "They have a four-star buy rating under Standard & Poor. They're about to start paying dividends. They have brought in a half-million more subscribers in recent months. They're up to 25 million monthly subscribers to their satellite radio service."
It's not just that the fundamentals of the company are strong, according to Nader. It's also the stock's recent peak that has him unhappy with Liberty Media's offer.
"A few weeks ago, it went as high as $4.15," notes Nader. "So, when John Malone offers $3.68 – which can go do because it's a stock exchange, not a cash payment to the shareholders to buy them out – he's lowballing it. And, of course, he's known for that. That's one reason why he's so wealthy."
Another reason Nader dislikes the deal is because the shares Sirius XM stockholder will get should it happen will have fewer rights than they do now. That will lead to a slew of lawsuits, he says.
"What hasn't been publicized is that the shares that Sirius XM shareholders get in return in one of John Malone's companies have very, very few voting rights," says Nader. "They're disenfranchised to begin with. So, I think that even though he has 53% of the shares, there are going to be challenges coming up with lawsuits in Delaware brought by a number of law firms on behalf of individuals and I hope some institutional shareholders like Leon Cooperman's Omega Advisors."
Nader also cites billionaire Cooperman, who owns 1.2% of the shares, as someone who also thinks Malone's offer is too low.
"As Leon Cooperman put it, he said it's materially undervalued for shareholders," says Nader. "Mind you, this is a growing company. And, when you have 25 million people who send checks every month, that is a very, very valuable asset."
Nader says investors won't know what a fair price for Sirius XM would be until shareholders can get more data through depositions of Malone's companies as well as Sirius XM itself. However, he says there's one way to determine what the lowest possible price should be and it's not the $3.68 Liberty Media recently offered.
"I know what the floor price would be," says Nader." You don't offer a price to buy out shareholders lower than its recent peak. So, it's definitely going to start in the four to five dollar range."
But Nader sees another motive behind Liberty Media's offer than just wanting full ownership of the company. According to Nader, John Malone wants a cheap way to get at Sirius XM's cash, which was $716 million in the last reported quarter.
"John Malone needs the cash flow of Sirius XM because he wants to buy Time Warner Cable and further concentrate the cable in fewer and fewer hands which isn’t the best thing for people who subscribe to cable TV," says Nader.
Leon Cooperman isn't the only fund manager Nader would like to see successfully keep Malone at bay. Nader, the former Green Party presidential candidate, would like to see billionaire Carl Icahn buy up Sirius XM shares and make a quick profit.
"I haven't spoken to him on this," says Nader, though he has mentioned Icahn as a potential white knight. "But, there is one wrinkle here that may discourage him in that John Malone has 53% of the shares and most of the companies Mr. Icahn goes into are not in that situation where he has to challenge someone who has 53% of the shares. But, I don't want to prejudge it. You know, he's a very smart man and maybe he can see an opportunity for quick gain if he enters the fray."
In the Talking Number interview above, Nader not only discusses his take on Sirius XM but also his views on the recent Supreme Court decision to end net neutrality. And, Nader also talks about his latest book, "Told You So: The Big Book of Weekly Columns". To see the rest of this fascinating interview, watch the video above.
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