Many investors are selling their Sirius XM (SIRI) stock, and trading it for Liberty Media (LMCA) in anticipation of a Liberty takeover which might pay Liberty shareholders a premium. Others are holding on to their Sirius shares with both hands thinking that Sirius shareholders will get a premium. I wrote an article which looked at the pros and cons of trading in Sirius shares, but I missed something really big. I always check Twitter and the message boards looking for any breaking news, or other stories that I might have missed. And today I found something which completely shocked me. I am sure the Sirius Bears who have now become Liberty Bulls will have some sort of explanation for this, and I am looking forward to a lively discussion in the comment section. What is so shocking? John Malone has been selling some of his Liberty stock, along with other Liberty insiders. According to Yahoo Finance, here are all of the insider transactions since December, when the forward agreement to purchase over 300 million shares of Sirius was first negotiated:
|Jul 5, 2012||MALONE JOHN COfficer||143,000||Direct||Disposition (Non Open Market) at $0 per share.||N/A|
|Jun 21, 2012||ROMRELL LARRY EDirector||3,465||Direct||Disposition (Non Open Market) at $0 per share.||N/A|
|Jun 15, 2012||ROSENTHALER ALBERT EOfficer||196||Direct||Disposition (Non Open Market) at $84.46 per share.||16,554|
|Jun 15, 2012||SHEAN CHRISTOPHER WOfficer||138||Direct||Disposition (Non Open Market) at $84.46 per share.||11,655|
|Jun 15, 2012||TANABE CHARLES YOfficer||351||Direct||Disposition (Non Open Market) at $84.46 per share.||29,645|
|Jun 15, 2012||MALONE JOHN COfficer||521||Direct||Disposition (Non Open Market) at $84.46 per share.||44,003|
|May 11, 2012||GILCHRIST MALCOLM IAN GRANTDirector||300||Direct||Sale at $89.88 per share.||26,964|
|Mar 26, 2012||TANABE CHARLES YOfficer||12,450||Direct||Option Exercise at $3.57 - $54.13 per share.||N/A|
|Mar 26, 2012||TANABE CHARLES YOfficer||6,643||Direct||Disposition (Non Open Market) at $89.50 per share.||594,548|
|Mar 26, 2012||TANABE CHARLES YOfficer||5,807||Direct||Sale at $89.50 per share.||519,726|
|Mar 15, 2012||ROSENTHALER ALBERT EOfficer||195||Direct||Disposition (Non Open Market) at $88.18 per share.||17,195|
|Mar 15, 2012||TANABE CHARLES YOfficer||351||Direct||Disposition (Non Open Market) at $88.18 per share.||30,951|
|Mar 15, 2012||MALONE JOHN COfficer||543||Direct||Disposition (Non Open Market) at $88.18 per share.||47,881|
|Mar 15, 2012||SHEAN CHRISTOPHER WOfficer||137||Direct||Disposition (Non Open Market) at $88.18 per share.||12,080|
|Mar 1, 2012||MALONE JOHN COfficer||2,500||Direct||Disposition (Non Open Market) at $0 per share.||N/A|
|Feb 27, 2012||TANABE CHARLES YOfficer||12,509||Direct||Sale at $87.82 - $88.95 per share.||1,106,0002|
|Feb 27, 2012||TANABE CHARLES YOfficer||20,319||Direct||Disposition (Non Open Market) at $87.99 - $88.93 per share.||1,797,0002|
|Feb 27, 2012||TANABE CHARLES YOfficer||32,828||Direct||Option Exercise at $17.26 - $54.13 per share.||N/A|
|Feb 27, 2012||ROSENTHALER ALBERT EOfficer||14,261||Direct||Disposition (Non Open Market) at $0 - $88.14 per share.||N/A|
|Feb 27, 2012||ROSENTHALER ALBERT EOfficer||13,000||Direct||Sale at $87.98 per share.||1,143,740|
|Feb 27, 2012||ROSENTHALER ALBERT EOfficer||26,076||Direct||Option Exercise at $3.57 - $54.13 per share.||N/A|
|Jan 4, 2012||TANABE CHARLES YOfficer||1,286||Direct||Sale at $77.50 - $77.99 per share.||100,0002|
|Dec 30, 2011||MAFFEI GREGORY BOfficer||53,264||Direct||Disposition (Non Open Market) at $0 per share.||N/A|
|Dec 29, 2011||TANABE CHARLES YOfficer||1,143||Direct||Disposition (Non Open Market) at $0 per share.||N/A|
|Dec 29, 2011||TANABE CHARLES YOfficer||17,742||Direct||Option Exercise at $3.57 per share.||63,338|
|Dec 29, 2011||TANABE CHARLES YOfficer||9,914||Direct||Sale at $77.50 - $77.99 per share.||771,0002|
|Dec 29, 2011||TANABE CHARLES YOfficer||7,828||Direct||Disposition (Non Open Market) at $77.50 - $77.99 per share.||609,0002|
|Dec 15, 2011||SHEAN CHRISTOPHER WOfficer||737||Direct||Disposition (Non Open Market) at $74.01 per share.||54,545|
Data provided by EDGAR Online
* = Where indicated, some values are estimates.|
1= Potential proceeds estimated by the filer.
2= Estimated based on the average of multiple prices reported.
3= Multiple dates reported. Most recent date shown.
Currency in USD.
After looking at the list, a lot of readers will ask what a disposition at $0 is. This is usually a gift to someone. Do not let the low share counts throw you. This is not Sirius XM. When Malone disposed of his 143,000 shares this month, on July 5, Liberty stock closed at $91.27 a share, for a total value of just over 13 million dollars. Why do this when there is a possible premium coming? And why would so many Liberty insiders be selling and not buying like other investors that expect a premium on a possible Sirius takeover?
What is really interesting is the fact that Sirius CEO Mel Karmazin has been criticized in article after article for selling half of his shares as part of his estate and charity planning. Yet I have not seen one article about these Liberty insider sales. I understand insiders selling their shares, but not when they are expecting the premiums that some analysts are predicting.
As you can see from the chart above, Sirius and Liberty have an almost identical pattern compared to the major market indexes. However Sirius has been outperforming Liberty for the last two years. And Sirius stock has done much better than most of Liberty's other investments:
A lot of investors are torn as to whether Liberty shareholders should even get a premium from a possible Sirius takeover. First of all, Liberty loaned Sirius money in 2009 when it was close to bankruptcy. And in a transaction that almost mimics the ABC show Shark Tank, Malone offered $12,500 for 40% of Sirius. I must admit that I have never seen the Sharks make that low of an offer. However, rarely does the Shark come to the company three years later wanting more money. Especially if their $12,500 investment is now worth $5.46 billion (which I have never seen happen on the show either). And consider the company is outperforming the Shark's company. Personally I think Liberty has gotten enough premiums from Sirius shareholders over the last several years. And I believe that Mel and the board agree. This is why they have not been willing to go along with the Liberty bid for de facto control of Sirius via the FCC.
Sirius is the "pure play" in this scenario. It is making the most money for shareholders, and there is no reason to think that it won't continue to do so. Earnings will be announced on August 7, and I expect them to be record breaking.
Disclosure: I am long SIRI.