The Liberty/SIRI saga is starting to clarify, now that is has it seems pretty simple what has transpired recently.
Liberty wants SIRI and is making their move.
A few weeks or so back they filed for ‘de facto” control of the company. Strange seeing how they only owned 40% of the company and did not have a majority on the board. Stranger still is that they made a procedural mistake or two on the filing itself. Liberty management, led by some smart guys, made some simple mistakes. No one thought anything of it at the time. Seemed like a slam dunk when SIRI protested to the FCC, and it was, Liberty was denied. All the while you have SIRI, led by Karmazin, trying to hold back Liberty. He wants to do share buybacks but will not do it if it means handing over the company to Liberty. Because of the nature of the business, as we all know Liberty cannot get their majority stake without FCC approval. So why go through all this when they knew they were going to get denied?
Today the answer appeared. Maffei said that Liberty will re-apply for control of Sirius. Why? What has changed? Well for one thing Liberty has bought 60M shares of common stock. They also bought up some of SIRI debt.
So the answer is pretty clear to me, at least I think it is. Liberty KNEW they were going to get denied in their application, by making simple mistakes they all but guaranteed they would. So what they get for their effort? What they got was the blueprint from the FCC. They were given the answer to what they need to do to get the blessing from the FCC to get the company. So they went out and went to work. Now they did not get over 50% but they are getting closer everyday, more importantly per the FCC request they have shown the FCC how they will get majority control. This could be good enough to take SIRI over. We will know in 8 days.
What if it is not enough? Then Liberty goes out and gets their 49.9% and re-applies again. So the writing is on the wall, this is done. Malone, smartly tried to get SIRI really cheap, within 8 days he will try to get it relatively cheap. If that does not work he will just pay for it.
The only real question now is if Mel stays or goes. If Malone did not like his act of trying to hold them off he may be gone. I doubt it though, Malone does not take business personally. I think Malone spins SIRI off with another company in their portfolio and Mel makes a decision whether to stay or not. To be honest I am not sure but I assume if they perform an RMT there will be a board of directors on that new company. If that is the case Mel might stay, he said yesterday that is how he prefers to work. If he has to work directly for the majority shareholder which he would if SIRI stayed as it is but under Liberty’s control, then he is leaving.
As for the future: Liberty will be happy for now with what will end up being a 53-55% stake giving them control and the benefit of the NOLs through SIRI, (meaning SIRI uses them but Liberty gains because any help to SIRI’s bottom line helps theirs), and THEN we buy back some stock. I doubt they buy back enough to get Liberty 80% but I do not doubt that at some point down the line they may do that, unless SIRI becomes overwhelmingly profitable and there is no need to use the NOLs elsewhere is the organization.
Either way the writing is on the wall, Mel wants to change the ticket but he may have his new boss changing it for him. Either way I think good things will follow. Who knows, if Mel stays they might even talk him into having a SIRI commercial or two, (gasp).
Just some thoughts, don’t kill me.
@rhamp - well written.
I'd like to add that people [at this point in time] are WAY to hung up on the PPS. People say things like "Malone must keep PPS up!" as if that is his only thought.
Liberty invested a small sum and got a LOT of company. Sure, if the stock is sitting at 2.20 it looks as if Malone has made 5+ billion dollars...great. Why would he care? That is just PPS paper value.
The important thing is Liberty wants to control a major add to their portfolio of companies. They are a media giant. Satellite content kings. The POINT is they are getting billions of dollars in assets, content source contracts, and "700 MILLION in FCF" per year for the price of a really nice Hyundai. Malone couldn't care less about the PPS of SIRI paper.
I do like your theory on the FCC application. Although, I guess these guys are well enough connected so they KNOW the score before the application is filed, but the other benefit was that filing created 'confusion/concern' in the market so Liberty could get more shares cheaper. Liberty set a 'ceiling' with the 2.15 issue while creating retail shareholder concern with the early application filing.
These guys are in business. Millionaires love billionaires, because every millionaire wants to be a billionaire. Millionaires club is open, Billionaire's club is by invitation. My guess is Mel & Malone 'Facetime' each other every night. :)
The procedural errors and giving notice of accumulation to become majority and a refile wont make them liable in a suite when the stock price tanks as institutions run for the exists after expecting more...
My question....If Liberty does a RMT why would they then do a buyback when they can just lesson the share count at that time and it doesnt cost them anything. And if that is what they do, what happens with all the FCF? Any thoughts? TIA
Good point. I think I crapped the bed on that point. when writing I was thinking of the various possibilities. You are 100% correct, if they spin SIRI and another company with an RMT then they do not have to buy anything back. they set a new share number.
When SIRI becomes 1 company again and gets rid of Karmazin and his cronnies and brings in some fresh faces with an eye towards the future, Then sirius satellite radio will move up and forward.
Right now it is basically 2 companies with 2 old farts in charge MALONE AND KARMAZIN and the company is stuck in the mud, and the retail shareholders have paid dearly for these 2 egotistical A-HOLES
I really never had a problem with Mel but after taking a day to think about some of his points yesterday I must admit I am not much of a fan.
Case in point:
1 Mel says there is nothing to make the stock price go up
2. mel infers that stock is down partly because no one knows what Liberty is doing.
3. he will not do a buy back if it means handing Liberty over.
as you can see I think Liberty gets the company soon. do the buyback and let the share price appreciate, who cares if it saves Liberty money. at this point we should want Liberty to save money because very soon we will be one.
Also (this got under my skin)
mel is not going to spend 100M on a commercial campaign
later he says he is not going to spend 4M on a super bowl ad just so he says he had one
Later he mentions how SIRI knows hot to get the new car buyer and SIRI knows how to get the certified used car buyer but he does not know how to get the person that buys a car from someone else that has a dormant radio
""I know the answer Mel, pick me, pick me" RUN SOME F-IN COMMERCIALS.
In all fairness I do not know what an ad campaign will or will not do but does Mel realize TV was basically created so people could sell products? I have a feeling it works.
Here would be my plan, no huge ad campaign. just run the ad's for two weeks, on the Super Bowl and for two weeks following. Tell anyone who has a dormant Sat radio that they will be turned on for 1 month starting right after the super bowl. Further, if they call SIRI at any time during the trial or after, they can sign up for another 2 months of free sat radio.
The flaw in my plan is I do not know how much it costs to flip the switch and turn on dirmant radios but I think they did it before. the only problem was that no one knew that they were turned on, or who turned them on, or who they need to call to turn them on.
Anyway, do the above and you get a hold of those people with dormant radios AND if they come back and call you, you have their contact info.
I think I am going to talk to someone at SIRI about this, i am bothered.