Should You Buy Sirius XM Or The Deeply Discounted Tracking Stocks?

Crunching Numbers
3.2K Followers

Summary

  • Liberty SiriusXM Group stocks are intended to reflect the value of the underlying assets of the Group.
  • Discount widens since the end of Q2.
  • Discount currently in excess of 32%.

As most investors in Sirius XM Holdings (NASDAQ:SIRI) are aware, Liberty Media (FWONA) (FWONK) owns the majority of the equity in Sirius. This position has been growing since Sirius began buying back shares in 2013, and as of October 22nd, Liberty's stake had increased to 71.2%. As Sirius continues to buy back its own shares, this percentage will continue to increase. Or, at least it will continue to grow until, and if the Sirius proposed merger with Pandora Media (P) is approved. Assuming the Pandora acquisition is approved, Sirius will issue approximately 430 million new shares to consummate the merger.

As of the third quarter 10Q filings by Liberty and Sirius, Liberty owned 3,162,173,996 of the 4,441,648,517 Sirius shares outstanding. With the addition of the 430 million shares to acquire Pandora, the total shares outstanding would climb to 4,871,648,517, and the Liberty ownership would decline to 64.9%. These figures are consistent with the statement by Liberty Media's CEO Greg Maffei during that company's Q3 conference call:

Liberty Media's Ownership stood as of October 22nd at 71.2% but I would note, and when the Pandora deal closes, which I'll comment on more in a moment. We expect our ownership to fall to about 65%.

Since the merger has not yet received regulatory approval, and since there should not be any meaningful impact to the discount calculations, the pre-acquisition shares outstanding will be used for the balance of this article.

The Discount

Background

One of the issues facing Liberty management is that the company trades at a significant discount to its underlying equity positions. In order to reduce that discount, Liberty decided to set up tracking stocks to isolate its holdings into three groups that were expected to more accurately reflect the performance of its Sirius holdings, its ownership of the Atlanta Braves (

This article was written by

3.2K Followers
As of May 13, 2022, ranked #95 out of 10,688 Bloggers (top 1%) by TipRanks and #392 out of 18,543 (top 2%) overall experts by TipRanks.com. https://www.tipranks.com/bloggers/crunching-numbersFocus had been mostly on Sirius XM Holdings, B&G Foods - and more recently on Arbor Realty - and income investing. Huge fan of stocks that pay dividends, mostly because studies have shown that much of the total return from investing in stocks has been from dividends. Will often repeat the above in articles that I write for Seeking Alpha. I also will often note that it is rare that I write about stocks/companies that I do not own. I have 30 years (through 2000) experience working for basic manufacturing and high tech industries in both the US and Europe. Company sizes ranged from start-ups to Fortune top 10. Experience as manager and/or grunt in fields of financial analysis, revenue forecasting, business planning, budgeting, pricing analysis, compensation planning, contracts, marketing and product management. Have been investing in stocks more than 50 years, options for 30 years and on and off in real estate since 1981. Laid off when the dot-com bubble burst, and had the luxury to begin investing full time.I have no separate paid service offered on Seeking Alpha despite having been asked to start one on multiple occasions. There are many reasons that I have not done so. The primary reason is that I benefited greatly from the articles - and especially from the comments - on Seeking Alpha when it was a free site, and contributors weren't paid. It is my turn to pay it back. A secondary reason is that I like the luxury of choosing when to write rather than feeling obligated to pump out articles on a regular basis for subscribers or restricting myself to some particular set of themes. I will reply to almost any comment, especially those that have a different view. If, however, someone disagrees with me and attributes a position or statement to me that I have not made, I will give them a chance to substantiate the claim. If they can't, and refuse to publicly acknowledge the error, I will no longer reply to that individual. Finally, for those that wonder about the picture I have chosen, it is a turkey vulture that had landed in our front yard. There are certain funds known as "vulture" funds that focus on companies with distressed assets. It was an investment class that had always intrigued me. Also, most of my early articles focused on SiriusXM Holdings, a company that I owned stock in and one that nearly went bankrupt. It seemed appropriate, especially after my original image was declined. It was an image of a pig and in reference to the Wall Street adage: "Bears can make money, Bulls can make money, Hogs (or pigs) get slaughtered."BS in engineering from Boston U, MBA in finance from Rutgers.

Analyst’s Disclosure:I am/we are long LYV, SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I own shares in many of the companies where John Malone has a controlling interest, although only own the two mentioned in the disclosures. In addition to my relatively small long position in SIRI, I also regularly day-trade large blocks of the stock. If the price moves sharply against me, I will occasionally sell covered calls against the position. I currently have 100 SIRI December covered calls with a strike price of $6.50. I may, at any time, buy or sell shares of SIRI, sell covered calls against a long position, or buy shjares in one of the tracking stocks.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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