Ever since Liberty Media (NASDAQ:LMCA) announced that they had entered into a forward contract last December for the purchase of 302 million shares of Sirius XM (NASDAQ:SIRI) at $2.15, there has been a lot of speculation surrounding who the forward contract is held with. After all, 302 million shares is a very large number, and no single institution seems to have been holding enough shares as of march 31, 2012 to be the partner.
One massive addition made during Q1 was by UBS. UBS was one of the institutions that worked with Sirius XM on the 7% convertibles notes due in 2014. The investment banking giant added an impressive 232 million shares in the three month period at the beginning of the year. Notable transactions included:
- UBS - Added 232 million shares taking its total to 233.4 million
- Vanguard added 8 million shares taking its total to 169.9 million
- Wellington sold 26.9 million shares bringing its total down to 168.6 million shares
- SAC Capital added 94.6 million shares taking its total to 98.3 million shares
- Coatue Management added 57.8 million shares as a new position
- Scout Capital added 56 million shares as a new position
Ironically there were 300 million shares added to the institutional holdings during the first quarter, a number just shy of the 302 million represented in the forward purchase contract Liberty media made.
While there is no way to tell if the undisclosed party in Liberty deal made all of their moves after March 31st, one can only assume that 302 million shares did not get traded in April without anyone really knowing. This would lend support to a stance that the undisclosed party already had at least some stake in the company, or that a substantial new player could be the group everyone is dying to identify.
The clues in my opinion would leave UBS, Coatue, Scout, and SAC Capital as the best candidates. One thing investors need to consider is that a second forward purchase contract could already exist and is simply waiting for an announcement date and a 60 day window. If this is the case, the Liberty issue may not happen as quickly as some think. The other options on the table for Liberty are open market purchases, and a tender offer to raise its stake.
Of special note is the fact that UBS was an integral part in the Liberty Media's initial investment in Sirius XM. The lead banker on the deal has now moved on to Tap Advisors, but there has clearly been a relationship between UBS, Liberty and Sirius XM. The bank would certainly be familiar with both Sirius XM as well as Liberty.
Things are getting interesting. Liberty has until about June 1, 2012 to file its appeal to the FCC in the quest for De Facto control. In its initial filing Liberty Media was denied in part because it had not demonstrated any moves to actually take control. Liberty will certainly share their forward purchase contract, their open market purchases, and perhaps some additional plans with its appeal. Stay Tuned.
Disclosure: I am long SIRI.
Additional disclosure: I have no position in LMCA