Throwing Light on the Sirius XM / Liberty Deal

With the news surrounding Direct TV (DTV) and Liberty (LCAPA), we once again have discussion about Liberty’s investment into Sirius XM (SIRI). Among items on the table is that the Liberty deal with Sirius XM can be reversed for a 5% premium. The clarity that is needed is that it is the LOAN (Phase 1) portion of the Liberty deal that can be bought off at a 5% premium, and not the 12,500,000 preferred shares (phase 2) that Liberty has.

Simply stated, Liberty owns the 12,500,000 shares outright, and there is no mechanism calling for the company to buy them back at a 5% premium. The 5% premium applies to the LOAN. Additionally, the company would need the cash in order to make such a move, and they do not have that kind of cash on hand. Yes, dilution is a possibility, but there are terms within the deal that protect Liberty from certain amounts of dilution.

The only mechanism that could possibly reverse the 12,500,000 preferred shares is if Liberty were to default on the $150 million payment in December that is a part of the phase two agreement. Given the substantial gain in value already for Liberty, they would be foolish to not pony up the dollars.

Investors need to break the SEC filing on the subject down into its respective parts. There is nothing in the agreement that would compel or force Liberty to sell back those shares unless they are willing to do it. That being said, a separate deal could be worked out if both Liberty and Sirius XM desire one, but as yet such a deal does not exist.

Position - Long Sirius XM, No Position Liberty

Comments

[Neal Barkett:]

There seem to be a number of options for both Sirius & Liberty. Makes your head spin. One may be he divested his interest in Direct TV to concentrate on Sirius Xm. He now has a strong position on the board of directors. I'm guessing he sees something very positive that they want to be part of, that we might get a better feel for on May 7th. Of course I'm an optimist when it comes to Sirius Xm. He does seem to have a pattern of wanting some say in his investments but not necessarily wanting to have total control.

May 05 08:47 AM

[wholesalecd:]

Oh, this whole thing is a travesty. Sell your shares now before Liberty swoops in to ruin the day.

Liberty will default and all the money will be thwarted to a new restructered company. That's why their merging with Direct TV.

Sell your shares now.

jay boy billy

May 05 10:54 AM

[relmar2003:]

You posted that on another article wholesalecd. Either comment on the article, or stop bashing. You are obviously paid to post that, as its impossible to be shorting this stock. did you sell at .05 cents and are just mad about it? Either way, your bashing is not working, and you make me laugh. But please, come up with at least a decent argument for your take, as your boring me. You throw me softballs, and I hit home runs.
THey arent merging with DirectTV. Not right now. In fact, Liberty is clearing the way to own more of SiriusXM in the future. As they did with DirectTV. 54% stake. Probably where they will hold. Thats YEARS away though. Your scare tactics make me want to buy more shares. If someone like you says to not buy, I run right out and buy. Usually works wonders for my portfolio. Keep up the good work wholesalecd, as my day gets boring.

May 05 12:05 PM

[CoolHead:]

I think wholesalecd is off the mark and I agree with Relmar. That look like an option down the road. Let's see what happens on Thursday! Only time will tell.

May 05 07:01 PM