The twists and turns keep coming in the soap opera of the Liberty Media (LMCA) quest for "de facto" and now "de jure" control of Sirius XM (SIRI). The news that Liberty Media's intent to gain actual control of Sirius XM was met with widespread speculation as to whether or not Sirius XM was cooperating with Liberty Media. The answer is that yes, there was cooperation, and no, there was not. Nothing in the world of satellite radio is ever simple.
Up until now, all we knew was that Sirius XM had made the statement in its SEC filing that it would cooperate fully with the FCC's evaluation. In point of fact, as I had previously stated, there is little Sirius XM can do to stop this process, and the technicality of the filing and how it is accomplished does not change that.
What investors should realize is that negotiations are happening, and until settled, it might make sense from a Sirius XM perspective to not give away anything until a deal in principal is signed, sealed, and delivered.
As we all know, the government can move slowly at times. Well, the filings are finally in, and the news is this: It appears that Sirius XM did not give Liberty the passwords to do the electronic filing, but instead did the filing for Liberty Media. The filing is indeed electronic, and in the text of the filings, it becomes clear that a certain level of cooperation exists. In other words, Sirius XM is cooperating with Liberty Media, but only to a certain extent.
Think of it like the last bits of a negotiation prior to inking a deal. In Exhibit 1, Sirius XM states: "Sirius XM intends to cooperate fully with the FCC in its evaluations of Liberty Media's application. Sirius XM has not signed the licensee and transferor portions of the application because it is not in possession of all of the facts required to make certifications." In addition, the waiver request in the filings clearly states that Sirius XM, "has reviewed the transfer/licensee portions of form 312 application, and Sirius has prepared the transfer/licensee of the form 603 and form 703 applications." Then, it goes on to mention electronic review. Clearly, the forms were submitted electronically and Sirius XM was aware that was happening because they assisted in the process.
What This Means
What we have here, through FCC filings, is a certain level of cooperation between Liberty Media and Sirius XM, with full cooperation between Sirius XM and the FCC as it considers the application.
Essentially the groundwork is all in place now for the FCC to render a decision. There are signatures lacking from Sirius XM, but likely, once the FCC rules, the parties would negotiate terms that would facilitate full signatures.
Some of the more pertinent documents can be located on the FCC website here. Liberty Media is indeed on a quest to get to de jure control, and it appears that Sirius XM essentially knows there is little it can do to stop that process. The company is holding back signatures at this point, but clearly the two sides (Liberty and Sirius XM) are in the process of trying to work something out.
At this point, Liberty sits just a couple of tenths of a percent away from a 50% stake in Sirius XM. The buying that Liberty has been doing on the open market is now due for a pause. At this point all eyes are on the FCC.
What investors now need to consider is the fact that Sirius XM's cooperation goes further than just the FCC, but not as far as signing the forms. And now, the FCC has to rule on whether they want assign de jure control while lacking these signatures. It is somewhat of a stumbling block that will likely make the process take a bit longer.
With Liberty Media now at 49.7% ownership, the next phase could be negotiations between Liberty and Sirius XM to get Sirius to agree to sign the proverbial dotted line. If an agreement between Liberty and Sirius can be reached, a simple amendment to the de jure application could be filed that would include the signatures.
For now, a cloud exists until a. the FCC rules without signatures or b. Sirius XM and Liberty cut a deal. In the meantime, Sirius XM will have a substantial ownership question mark over its head.