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There have been hundreds of articles written about Sirius XM (NASDAQ:SIRI), and the looming takeover by Liberty Media (NASDAQ:LMCA). As of Friday, its FCC application for de jure control of Sirius, which was filed on August 17, had not yet been accepted for filing. Sirius CEO Mel Karmazin, and Liberty CEO Greg Maffei publicly voiced concern about this (see Karmazin made... link below). And just this morning, one of my Seeking Alpha readers, DSandman999, found a letter sent to the FCC on September 17 by Liberty:

I ran across a letter filed 9/17/2012 by LMCA. I am sorry if you all have already seen it, but some folks on various threads have been talking about replacement of the board and such. This letter pretty much says they do not plan on replacing the board until at least the next share holder meeting in May 2013. They have to submit a slate of possible board members in March.

This should make it easier for Karmazin to negotiate his contract, if he wants to stay with the company. He has demonstrated that he is in complete control of the current board with his fight to keep Liberty from taking de facto control of Sirius. A lot of shareholders will be relieved to have the stability of the current board during this possible change in control. Especially if Karmazin does leave at the end of his contract in December. The current Sirius XM Board and Mr. Karmazin have brought the company though some very trying times, with exceptional results. In the past year shares have risen from a low of $1.27 to close at $2.59 on Friday. This is a gain of 104% which beats Apple's (Appl) 91% gain this year.

Chart forSIRIUS XM Radio Inc.

But there is something that has been bothering me, and I feel that I must bring it to the shareholders attention. What if Liberty is not approved by the FCC? This could happen. There are a lot of Sirius shareholders that would probably jump for joy at the thought. However this could set up a very complex situation. The biggest loser would be the Liberty shareholders who bought shares in anticipation of a premium paid to them in the event of a Reverse Morris Trust, and a consequent spin-off of Sirius. If Liberty does not get FCC approval, this will not happen. And actually, there are no guarantees it would happen with FCC approval. The chance that either Liberty or Sirius shareholders would get a premium with a change of control is pure speculation.

But what are the financial consequences to Sirius shareholders if Liberty loses this battle? Things would stay just as they are, right? Probably. However, Liberty could start unloading its shares. Normally I would not suggest this, but there have been several articles and lots of chatter on the various financial sites saying that if this does not work out with Sirius, Liberty will move on to another takeover target which would require cash. Cash that is invested in Sirius. Before you panic, remember that the FCC has not ruled one way or another on Liberty's application. Some readers have suggested that this is a busy time of the year for them, and others think they are just ignoring Liberty.

And Liberty Management may not unload those shares on the open market. They may still have enough clout to structure a buyback of some of Liberty's (Sirius) stock by Sirius. And then those shares would be retired which would give cash to Liberty and more equity to the rest of the Sirius shareholders.

In August, when Liberty filed for de jure control of Sirius, I wrote an article saying that this application looked good, and it did not appear that Sirius would fight Liberty this time. And I still feel that way. But Karmazin made some troubling remarks recently about the fact that Liberty has not spoken to anyone at Sirius about this takeover. This makes me wonder if Liberty would fit the FCC's description of a "team player". A trait that would be mandatory for the operation of a satellite company that Liberty Chairman John Malone wants to take global.

Keep in mind all of this is speculation on my part. The FCC might put the application up for notice at anytime. If you are interested in checking the status, you can check back here. Then just scroll down to Liberty to see the current standing of the filing. Once it is "put up for notice", the public will have at least 30 days to communicate their opinion about the merger to the FCC.

Should you buy, sell or hold? That depends on your tolerance for risk. Sirius is an exceptional company with everything going for it. I fully expect that there will be a positive sub announcement as early as Monday for Q3. And the stock will jump on the news. But there are other short term risk factors right now. Not just the FCC approval of Liberty, or whether Mel Karmazin stays or not.

There is an election coming up, with a very critical debate between the two candidates. The outcome of the election may cause a lot of tax laws to be changed. As it looks right now, it would be almost impossible to structure the RMT before the end of the year. The tax laws could change drastically in 2013. There are a lot of congressmen that want to close any loopholes that they can find. Especially one where billionaire owners buy companies, and spin them solely to avoid billions of dollars in taxes on the gains.

Source: Liberty Media Plans To Keep The Current Sirius XM Board Until May 2013

Additional disclosure: I may buy shares of Sirius in the next 72 hours.