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Stephen Faulkner

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  • Some Sirius XM Investors Just Don't Get It [View article]
    I must have misread something. So strike the question.

    "So, now they have an asset worth $10 billion with a cost basis of $2 billion. "

    This is what I meant by mixing the two low /high sets of shares. I believe they should always be considered independently... especially because it seems LMCA considers them independently. I don't see an issue with Liberty seeking to get the high basis back.
    Oct 27 01:53 PM | Likes Like |Link to Comment
  • Sirius XM Radio (SIRI -3.1%) spikes lower with news out Apple will enter its space with an Internet radio servive. The company that will soon be pulling the reins with Sirius, Liberty Media (LMCA -1%), is also tilting lower. [View news story]
    "Demographics and mathematics for these offerings is the future model of monetizing sticky accounts, let alone the direction of the music industry, royalty issues, content ownership and revenue projections."

    Most brains are not going to process this well. Just sayin'....
    Oct 27 01:12 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]

    "Point 1 still leaves the company with a lot of debt and high interest payments. And, it still ignores the reasons behind the desire of Malone-Maffei-Liberty to cash out "800" million shares of a rapidly appreciating asset"

    But have they said they wish to cash out yet on the low basis? Perhaps they don't wish to do so... and ride it at least 24 months (or more?). Perhaps they simply bought control now when it is cheaper so they could get into position, rather than wait a few years or more when they see growth slow and wish to RMT the whole thing?
    Oct 27 01:09 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "As to the rest of your comment, can you see that paragraph three is based on a fundamentally flawed position?"

    Yup!

    "And I use the term quickly because Maffei discussed being willing to participate in buybacks prior to de jure approval to keep their ownership below 50%. And, regardless of whether we are talking about participation prior to de jure or an 18 month period as "quickly," why not just wait for de jure and NOT sell ANY shares? Isn't that the best way to maximize value in your scenario? "

    Well, no. I mean if they are geniuses and all, and they would participate in buybacks NOW, then why even hold SIRI at all? Heck why hold LMCA as LMCA's cap is tied in great deal to SIRI? If they are in such a hurry to dump this stock that they would sell back even a single share right now... it must be a terrible investment compared to other opportunities they have.

    Of course I'm being sarcastic here but I just don't see the thought process that they don't wish to spin the high basis, and would prefer to not have had to enter that position anyways, so when they can they wish to exit that portion of it.


    "And, if your argument is that Malone has better uses for the money within Liberty, doesn't that suggest you should also be long Liberty and not Sirius?"

    I'm not interested in being long LMCA or following Malone's money. I mean, why doesn't everone do exactly the same as Buffett? Why not just buy BRK? Just follow the guy at the top?

    I am not saying Malone has better uses for the money within Liberty. I am saying he may have other uses for it, and that they have stated they would prefer not to spin high basis.

    I mean, I'll be honest here. I see future potential in SIRI and I believe they will do well. That's why I invest in SIRI. I don't invest in SIRI to play a few percent premium one way or another in an RMT spin by Liberty. I obviously do not understand the intricacies of this too an extent that make me feel comfortable in trying to play the right end of it for a few percent. I recognize that their actions can (and have) pushed appreciation in the share price, and see this continuing at least until the RMT itself. I can reassess at that time, as there is plenty of time from "now until then." For right now, SIRI is the benefactor, regardless of whether or not LMCA will be later on. If in the process of all of this SIRI appreciates 75% from current levels to a bit over $5 per share in 18 months? I'm thrilled. :)

    While thinking about possibilities is important, and perhaps it is even enjoyable for the analytical mind to dig into the intricacies of the situation. I can understand and appreciate that :) At the end I may come out a few percent behind but eh... it's a LOT less work :P
    Oct 27 01:04 PM | 2 Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    Two things I dislike.

    One. Assuming all the borrowing will be done immediately in January 2013 or before and not spreading it out through 2014. Game changes if they go half and half, or even less. If they wish to go the route of 12 months before buybacks and turn it long term on the gains, borrowing starts in July next year. If it's graduated instead of one lump sum the FCF is higher, cash is higher at time of borrowing, etc. Changes things, and they can keep it around 4 to 4.5X.

    Two, mixing cost basis. Low basis and high basis mixed confuses things since their intention is to retain and spin the low (or at least their likely course in my opinion) and sell the high back in buybacks to get the cash out. They have stated they would prefer not to spin high basis. The two lumps should be looked at as different entities and not homogenized into one cost basis, as they are like oil and water with regards to what will happen to them.

    One thing I do like. You make me think Sir :P Though I don't appreciate it five minutes after I wake up after a long night! ;P
    Oct 27 09:02 AM | Likes Like |Link to Comment
  • Sirius XM Q3 Earnings Preview [View article]
    Thanks Spencer! I was waiting for this and I missed this article earlier cuz I got caught up in the fire of CNs :)

    "Personally I think there is relative safety in SiriusXM at least until the time Liberty gets back its $1.5 billion (18 months from now).

    At the time Liberty decides it is right to spin, that may be the time they see the growth curve flattening out."

    I find your take on this matches up completely with mine... and in far fewer words than I use :P lol

    Looking forward to the call :)
    Oct 26 11:46 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    If it's not clear... Liberty certainly cares about the health of the company and the share price into that RMT. It's going to determine the worth of the spin. To rush things and over leverage, damages SIRI the same on their 50% as well, as the impact would be there before the RMT happened.

    If the spin is done at $1 per share, and it increases to $5 afterwards... well, now they have a $4 per share increase on the spun shares, no RMT available to save from taxes.

    There is massive benefit to Liberty to make sure this company does NOT over leverage, that they do NOT rush the spin (except pending changes to tax code) and that they make sure the spin is done when the time comes on a SIRI which is in good health. You want SIRI at the highest price possible on the RMT... heck, even inflated. You want to extract every cent you can on the LOW basis spin. The high basis matters very very little in this game... $250 million is a joke compared to $4 billion (again made up numbers for example purposes). And if SIRI is going well, they may wish to hold on longer even after the 18 to 24 months taken for the buybacks. If SIRI is growing, why not grow that value and tax free spin later... you're already at 50%. You can spin when growth levels out and yank the cash then. Until then why not take advantage of appreciation of SIRI, further buybacks, good cash flow, etc.

    I'll admit here I am absolutely no pro on specifics of an RMT, tax code, etc., but from what I do understand it just makes sense to me that they wish to make sure SIRI is strong for the RMT itself.
    Oct 26 11:39 PM | 1 Like Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    Here's my issue here. Soooo la de daa, we go down the line, ahead in time, whatever. LMCA owns 50% of SIRI, de jure, all that. Share buybacks start. LMCA has high basis $2.30 or so cost basis on 10%, and $0 cost basis on 40%. Making up numbers for rest to keep this simple...

    SIRI is at $3 per share, $10 bil cap. Liberty stake $5 bil, Liberty high basis gain $0.70 on $2.30 or roughly 30% so $250 mil give or take on $1 bil present value of that portion. Liberty low basis gain intended for RMT spin infinite percent... $4 billion.

    Liberty levers up on SIRI to buy back. Impact combined with performance is increased share price to $5 over 18 months, Liberty gets back the $1 billion pays cap gain on $250 million (or more depending on timeframe and price sold back at). Liberty 40% low basis stake previously $4 billion now is worth $6.666 billion (I'm sparing the tedious math here, there's a lot going on). They wish to do an RMT!

    AHHHH but the STREET says no freakin way... we see your nonsense! You just levered up to 5.5X! S&P just cut your rating down 2 or 3 tiers and analysts are screaming to sell. We're getting the heck outta here before you spin....

    Investors bail, share price plummets off a cliff. RMT goes through, Liberty spins a company in trouble or at the very least some stale old cake with the frosting licked off (gross) to shareholders at $1 a share or less because nobody wants it in the current state. Liberty's stake is now worth a mere pittance of what they could have gotten if they were careful with buybacks, took their time, and spun out later. The tax savings? Who cares at that point. I'd rather pay a 40% tax on $6 billion than 0% tax on $1.5 billion.

    Not sure if what I am saying is clear. :P
    Oct 26 11:25 PM | 1 Like Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    If you're just keeping it through earnings you are playing with fire... could take off, could run down, could stagnate until the technicals catch up.

    If you're willing to hold for awhile, I believe you'll do well.
    Oct 26 11:07 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    Thanks Pete again for a wonderful nugget of wisdom. Something that pay is...
    Oct 26 11:05 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "The real issue is a refusal to look at what Malone's objectives could be. How many comments have you read that question why Malone is anxious to sell the 600 million shares he just bought? I don't recall seeing any real discussion about this."

    Regarding this, I take it that LMCA wishes to get the cash back here. They cash out on this part, and retain the 50% stake through proportional buyback. It's a way to get the dividend without cap gains on the full amount, only the "gain." I'm not so sure I'd take it as a negative. They've also said they don't wish to spin high basis as you have stated, so high basis must be dealt with.
    Oct 26 11:02 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "With Sirius, many longs have no interest in the risks associated with this investment and think that if no one discusses them, they aren't there."

    Oh come now... this is every stock out there. There's always the passionate few. SIRI has a ton of exposure and is highly followed so it's going to have what seems like more than its fair share. Ask anyone who writes bearish on AAPL how the response is...

    Trust me, from only a small number of articles on P I've received what I would consider proportional amounts of hate. It's why I don't write so many of them... even if I do think P is a terrible investment. I don't deal well with ... confrontations. :P

    Crunch handles the flak better than I! I will say spotlighting the few, though, tends to get the masses riled. Especially given the history of individuals relentlessly trashing SIRI investors and then vanishing when proven wrong... Many are touchy :)
    Oct 26 10:57 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "Media companies are valued on FCF and EBITDA. Adding debt at 5% interest is cheap. If the company stock goes up more than 5%, value has been added."

    VERY important point Spencer has here.
    Oct 26 06:05 PM | 1 Like Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "I appreciate that. But you type to damn fast for me to keep up! Or, perhaps I think too slowly. Or maybe I just don't want to give gabriel borenstein a useless reference point to nitpick.... "

    Combo of all of 'em! ;)
    Oct 26 05:29 PM | Likes Like |Link to Comment
  • Some Sirius XM Investors Just Don't Get It [View article]
    "A bit overly dramatic, but I do appreciate the colorful prose."

    It was a bit colorful... =/ but I got the point across ;)

    ""We are involved in negotiations about whether or not or how much a control premium [to effect a deal] would need to be,""

    Different premium, though. This is talking about a premium paid to SIRI for control to be handed to LMCA that Mel was seeking at the time. This has nothing to do with "Malone wants a premium" in an RMT spin. This quote refers to the same thing said in a different way. They are involved in negotiations. Whether or not there would be a premium paid, and how much. The other quote "if there is a premium, don't forget about me" or something to that effect, doesn't say "there will be a premium and I will get it." If Malone thought he should get a premium, wanted a premium, and was going to get a premium, why bother with the nonsense of playing the "if" term? Politics? I dunno...

    It's a discussion that will run into the ground with both of us disgreeing, though, that's for sure! Premium burned to a crisp ;)

    " I suspect that Liberty is thinking in terms of Net Debt and unadjusted for leases... I believe they have already said they are comfortable going towards 4x on their leverage measures."

    Oh come on now... so they have no idea how S&P does their ratings? Or do you think they simply don't care what the credit rating is? And if that is the case, why not borrow the max they can get?
    Oct 26 05:28 PM | 1 Like Like |Link to Comment
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