It was announced today that Sirius XM's (SIRI) new Chairman of The Board will be Greg Maffei, CEO of of Liberty Media (LMCA). The move is not necessarily unexpected given that Liberty Media controls over 50% of Sirius XM's stock. If there was ever any uncertainty that Liberty Media would exert its control over Sirius XM it should have evaporated with this news.
In addition to the news regarding the Chairman of The Board, it was announced that the satellite radio provider will be conducting its Q1 conference call on April 30, 2013 at 8:00 AM.
While it is expected that the numbers for Sirius XM will be positive, the bigger questions likely relate to the timing of a potential share buyback, or even whether or not it has already started. The share buyback has many dynamics in play.
Liberty Media currently carries a position in Sirius XM of over 50%. There was potential that Liberty would drop below 50% if the holders of convertible bonds exercised their conversions on a change of control. Had that happened, Liberty could have been in a position to buy additional shares to maintain 50% ownership. As things stand now, Liberty can forego participating in the initial phases of a share buyback to allow the process to increase its ownership level such that the convertible bond dilution would not take the Liberty stake below 50%. Even if the Liberty stake were to fall below the 50% level it would not initiate a new change in control.
Popular consensus is that Liberty Media will want to garner back the $1.7 billion it invested into Sirius XM via share buybacks that could stretch out for years. Depending on the price paid to buy back shares, Liberty could hold a stake longer in order to facilitate selling back high basis shares above and beyond the value of $1.7 billion. In theory, after all high basis shares have been sold, Liberty Media would still hold half of the company with shares that were essentially free. At that point a spin, or Reverse Morris Trust could come into play.
One wild card with the common assumptions listed above centers on Liberty Media's recent acquisition actions surrounding Charter Communications (CHTR). Liberty Media always seems to be in search of the next big deal. Should Charter become more central to Liberty than Sirius XM, timelines that many have assumed could go out the window. That being said, I believe that the Liberty Media agenda and that of the balance of shareholders align, at least for quite some time.
With Maffei at the helm of the Board we may begin to see whether or not Sirius XM makes a shift in direction. At times it has seemed that Sirius XM is not being aggressive enough in the audio entertainment space. Liberty Media's John Malone once expressed that he felt that then Sirius XM CEO Karmazin was not thinking in the longer term with regard to technology and potential. Will we see a new Sirius XM now that Maffei is officially running the board?
Additional disclosure: I have no position in CHTR.