When your expectations are confirmed, it can be a wonderfully comforting thing. This is especially so if your expectations are "good." Listening to Liberty Media's (LMCA) Greg Maffei speak at the 2013 Citi Global Internet, Media & Telecommunications Conference on January 8th, I came away with a feeling of comfort in how the company will handle buybacks at Sirius XM (SIRI). Why? Because it became apparent listening to Maffei's words that Liberty should do as I have been expecting.
Maffei was asked in direct fashion within the conference (skip to the 17 minute mark) about the structure of Liberty Media and the weighting of Sirius XM within that structure. His answer touched upon an issue that has been weighing on the minds of some investors. How fast will Liberty Media seek to spin out Sirius XM? Maffei stated on at least two different occasions:
We've had this SIRI stake for quite awhile... uhh... three, almost coming up on four years now. You know, John Malone has said someday SIRI will become an independent company and I'd be silly to disagree with my chairman who has 45 percent of the vote. But I think he's right in pointing out that doesn't necessarily mean that's going to happen in 2013 or 14... that it's somewhere down the road... you know that'll be the way it is.
...and I certainly would agree with John (Malone), someday SIRI will be an independent company... uhhh... but I don't think that's a 2013 or 2014 event.
Clear, concise, to the point, and stated twice. Sirius XM will likely have at least two years under Liberty Media's control before a spin is done.
So what does this mean? For those concerned that Liberty Media may wish to quickly lever up Sirius XM's balance sheet and rapidly perform buybacks in order to return Liberty Media's "bait" on the shares purchased for 10% of Sirius XM in 2012, I believe that concern can be laid to rest a little bit. Maffei's statements give me great comfort in my expectations that Liberty will be careful and strategic about Sirius XM's buybacks, and that it has allowed enough time to do this.
This is what I have been stressing all along. Liberty Media has a goose that lays golden eggs with Sirius XM, and to simply gut the goose to grab a few eggs immediately would be a huge mistake. Patience is often expressed as a virtue, and I believe Liberty Media will be patient here.
But patience is not necessary, or even prudent, in all moves Liberty may make, and on the other end of the spectrum, I believe Liberty Media will be in a hurry instead of exhibiting patience with regard to taking control of Sirius XM. With the FCC approval for Liberty to go over 50% and move to control of Sirius XM, I believe it has been purchasing shares on the open market over the last couple of days in order to make this happen. I would not be surprised to find out that after the close of trading today, a form 4 is submitted showing share purchases by Liberty, or even perhaps enough shares to bring it to control of Sirius XM.
There's no reason to wait. Liberty needs a relatively small number of shares to move to control, and it should be expected that the final shares will be scooped up as soon as possible. It doesn't particularly matter if Liberty pays $3, $3.10, or even $3.20 on these final shares. They are a drop in a massive bucket, and a few hundred thousand dollars extra, or even a few million on a stake that is ultimately worth billions, is "chump change" if it cements control. Do not expect Liberty to be patient here, and do not expect Liberty to take the full 60 days. There is no reason for it to do so.