By Brandon Matthews
Several weeks ago news broke that Liberty Media was planning a spin-off of Liberty Capital (NASDAQ: LCAPA) and Liberty Interactive (NASDAQ: LINTA). The seemingly positive news was quickly dampened first by Moody’s, and subsequently by Standard & Poor’s as both agencies placed Liberty Media under credit review.
These credit “downgrades” occurred just as Sirius XM Radio (NASDAQ: SIRI) was enjoying a strong uptrend as it was approaching the Russell Reconstitution, while its shares hit a $1.08 high.
Since the announcement, shares have tumbled to an intraday low of .90 last week. I had speculated that the potential for a credit downgrade of Liberty Media was the most likely cause of Sirius XM’s sudden weakness, even as the overall markets provided a smokescreen to the reality of the situation. According to Sirius XM’s SEC filings, the non-public preferred stake held by Liberty was issued to Liberty Radio, despite the gains being attributed to Liberty Capital for reporting purposes. Liberty Radio is a subsidiary corporation to Liberty Media.
With Liberty Media’s credit rating at risk, short sellers are betting that Liberty Media could have been forced to convert and liquidate all or part of its Sirius XM stake. Looking back, Liberty’s attempted acquisition of Worldspace fell through, which may also lead some to believe that Liberty has abandoned whatever plans it might have had regarding Liberty Radio.
To long term Sirius XM investors, the idea sounds ridiculous in that Liberty has stated unequivocally that it will not convert its Sirius XM preferred stake. I remain convinced that some sort of buyout offer will be coming next year, once the existing standstill agreement expires. Liberty has also indicated that this scenario is a strong possibility in various press conferences, since taking its initial stake in Sirius XM.
I can now report that sources at Liberty have confirmed that Liberty Capital will retain the Sirius XM stake, following the Liberty restructuring. This means that Liberty Media’s credit concerns will not jeopardize the Sirius XM stake held by Liberty Capital, and that the dilution potential the short sellers are betting on has just fizzled out.
Position: Long SIRI
Anything to make the shorts nervous is a good thing. Liberty must have big plans for SIRI and long term, this is a good thing. Good info Brandon.
……………..and on and on and on it goes……………….
never ending and dissapointing is the near-year long plight of SIRI move to “1.35-1.80″pps………………….Zzzzzzzzz
Patience young ones……..
Uh huh. Samo-samo. This gets just plain silly after so long.
The most plausible scenario is that Sirius XM will remain a highly attractive vehicle for Liberty and that this will lead to an eventual buyout, as noted in the article above.
Investment in SIRI has all the characteristics of a “special situation” – as this longer term buyout potential should remain a consideration through all of the shorter term market fluctuations.
Ok, I am a bit of a novice here but have invested in sirius heavily. So, what would a buy out of sirius do for the stock?
Since Mel/shareholders wouldn’t accept anything less than a good price, it would increase your value by a lot.
Buy out would bring the stock price back to $1.
I am a believer in the product. However, there is always neg news at just the right time to hold this stock back. Why was Liberty’s credit watch done just the Russell recon was happening????
To the novice: a buyout will reduce your potential for profit significantly. If anyone on this site believe that Mel is going to dictate to Malone is on drugs. When the stock was at .05 cents, John Malone bailed out the stockholders. I believe that Liberty has huge plans for siri but they do not include us!!!!! I said it before: TO the victor goes the spoils. Malone was the victor. I just want hang a bit and see where it might go in the yr end. I know I am not going to retire like employees did at Microsoft.
Mel and John had a huge chance to wipe out all the commons, but they (or Mel) didn’t do that. If you haven’t seen enough how corporate big guys wipe out common shareholders, you are not in a position to advise anything to anyone.
Would it make sense to you that you pass a perfect chance only to find a second best chance to do something? You can of course enlighten me if you know why they passed the perfect one for the next best chance.
To the novice: a buyout simply means someone wants to buy the whole thing offering premium to the current stock price. So as for SiriusXM, if someone wants to buy it now at 1.00 per share all stakeholders will simply have a good laugh, but at 2.00 or higher everyone will get very serious.
So, it can be a great profit if a buyout comes when your average is similar to the current stock price. If you are only around 50%~75% the current price, your chance to recover all or most of your money is very likely. If you are somehow below 50% of the current stock price, a buyout will most likely cost you.
valuewise… If your invested total is worth 50~75% at the current price… sorry for using percentage in a confusing way…
SIRI will be $1.35 by the time their Q2 is out, unlike Q1 SIRI will not announce any news.
Not to confuse anyone with facts, but regardless of how the legal document reads, Liberty Capital Group, LCAPA holds the interest in Sirius XM…….
Liberty Media Corporation owns interests in a broad range of electronic retailing, media, communications and entertainment businesses. Those interests are attributed to three tracking stock groups: (1) the Liberty Interactive group, which includes Liberty’s interests in QVC, Provide Commerce, Backcountry.com, BUYSEASONS, Bodybuilding.com, IAC/InterActiveCorp, and Expedia, (2) the Liberty Starz group, which includes Liberty’s interest in Starz Entertainment, (3) the Liberty Capital group, which includes all businesses, assets and liabilities not attributed to the Interactive group or the Entertainment group including our subsidiaries Starz Media, LLC, Atlanta National League Baseball Club, Inc. , and TruePosition, Inc. , Liberty’s interest in SIRIUS XM Radio, and minority investments in Time Warner, Time Warner Cable, and Live Nation.
That’s ok though …… have fun with it all ….. and create all the speculation you want….
Fact is that according to Sirius XM’s SEC filings the stake is held by Liberty Radio. Liberty also had announced that it had transferred the stake to Liberty Satellite Radio….and that is a subsidiary of Liberty Media. You pulled something off a website that was not updated…
Well if Mel is of his word he said he will not sell unless the stock buyout price is in double digits.
So he is saying he wants at least $10.00 a share.
I think he is a man of his words.