Sirius XM Sets Share Price

| About: Sirius XM (SIRI)

As many investors know, last month Sirius XM Radio (NASDAQ:SIRI) entered into a share repurchase agreement with its parent company, Liberty Media (NASDAQ:LMCA). While the dollar amount of the purchase was fixed at $500 million and the sale schedule had been established, the agreement described how the shares would be priced, but not the actual price per shares. In a prior article, I wrote:

The 8k filing reveals the following additional information:

  1. The Liberty Media (LMCA) discount will be 1.5% from "the average of the daily volume weighted average price ("VWAP") per share of the Common Stock during the ten-day period beginning on the third trading day following the date of the public release of our third quarter 2013 earnings"
  2. The VWAP will have an upper boundary of $4.18 and a lower boundary of $3.64
  3. The purchases will be made in three phases, with the first purchase amount of $130 million taking place in November, the second in January of 2014 (for $270 million) and the third in April of 2014 (for $100 million).

Thursday, Liberty filed a From 4 disclosing that the purchase price was $3.6603 per share (representing a 1.5% discount from the VWAP) and that it had sold 43,712,265 shares. The price indicates that Liberty will be selling a total of 136,600,825 shares.

The purchase price is mixed news for Sirius XM investors. On the plus side, Sirius XM will be buying close to the maximum number of shares Agreed to under the terms of the agreement, which had minimum and maximum prices factored in. On the minus side, the reason the number of shares is towards the maximum is because of the recent weakness in the share price.

One other interesting item. As noted above, the share repurchase was to take place in three installments, with this first installment being $130 million. There was an option where the purchase could be accelerated by Sirius XM, provided Liberty agreed to do so. The math shows that the total purchase is not $130 million, but $160 million.

This increase in the payment amount may indicate that Sirius XM is planning on buying the shares from Liberty more quickly so that it can finish the $500 million purchase ahead of schedule. That would allow Sirius XM to return to the open market to once again begin making purchases from non-Liberty shareholders.

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: In addition to my long positions, I have January 2014 $3.50 covered calls written against many of my long positions in Sirius XM. I also trade blocks of Sirius XM on a regular basis.