By now Sirius XM (NASDAQ:SIRI) investors have heard it a thousand times. It comes written in various ways, but the message is always the same:
John Malone of Liberty Media (NASDAQ:LMCA) will seek a premium from Sirius XM.
All you have to do is read the many articles surrounding both companies, and you will find cases of both authors and commenters saying definitively that John Malone said he wants a premium. Often this is coupled with an argument that Liberty Media will somehow squeeze a premium out of Sirius XM shareholder's pockets to the tune of 5% or more.
Some quick checking, though, will find that the quote many commenters and authors are making assumptions from has no verbiage that suggests Malone and Liberty Media are seeking a premium from Sirius XM at all.
I wrote an article surrounding the following quote on July 13th which can be read here.
"There are three parties in this deal - Sirius and its shareholders, Liberty and its shareholders, and there's me personally because I am the controlling shareholder in Liberty," said Malone. "So when you ask yourself, 'Should there be a control premium and if there is one, who should get it,' don't forget about me." -John Malone
Why did John Malone say this? Consider the Reuter's article from July 12th where the quotation was pulled from. Malone was asked a question about Mel Karmazin's desire for a "premium" for Sirius XM shares :
Karmazin has been telling Wall Street that he will not give up control of Sirius without securing a premium from Liberty for his shareholders.
At the annual Allen & Co media and technology conference in Sun Valley, however, Malone said on Thursday that if anyone was going to get a premium in a deal, it would be he.
It's very important to understand the context of a statement and not just the statement itself. The article makes it clear that "if" anyone was going to get a premium it would be Malone. The key word here is "if." Anyone reading Malone's actual quote should be able to come to the same conclusion. "Should there be a control premium? And IF there is one..." It's right there in plain sight.
So how does this turn into "Malone has said he will get a premium" or "Malone has said he wants a premium"? One has to only look at the title of the very same Reuter's article.
"Liberty's Malone says he should get premium in Sirius deal"
If you see this as a title and do not read the full article, you could easily be misled into thinking that Malone said "he should get a premium." As authors and commenters alike repeat this and form articles and theories and ideas around it, it becomes "fact" when it is actually "opinion" or even straight up fiction.
Why is this important to investors? Because a 5% or more premium being sucked out of one company and handed to another would be something investors should be aware of. If an investor were to know that sometime soon, the company they were invested in was to pay out 5% and receive nothing for it, they should adjust their value of the company appropriately for the impact that such an action would have. Someone who believes Malone has stated that he will seek a premium, when he has not, may be undervaluing their investment in Sirius XM or overvaluing their investment in Liberty Media.
It is so very important that investors question, and fact check everything they read, especially in cases where high impact things such as premiums gained or lost are discussed. Could one speculate that Malone will seek a premium? Certainly. But this is speculation or opinion and carries far less weight when investing than definitive facts.