Shareholders' Group Sues Sirius XM
LOS ANGELES -- November 3, 2008: A group of shareholders calling itself "Save Sirius" has filed suit against Sirius XM Radio in U.S. District Court in Los Angeles, accusing Sirius XM management of violating the federal Racketeering-Influenced and Corrupt Organizations act, breach of fiduciary duty, and violation of the Sherman Act.
The group, which claims more than 500 members, is asking the court to stop Sirius XM from issuing more stock or from implementing an up to one-for-50 reverse stock split. In an SEC filing earlier this month, Sirius XM said it would be seeking shareholders' approval for a stock split of between one-for-10 and one-for-50, as well as permission to issue more stock.
Save Sirius spokesman Michael Hartlieb said, "We are working to gain control of our company by seeking to remove current members of the board as well as top executive Mel Karmazin."
The group quotes a September 15 Wall Street Journal article in which Sarah McBride wrote that Sirius XM CEO Karmazin "said he would love to take the company private," and that doing that would "become much more feasible" if Sirius XM were to generate positive cash flow in 2009.
The Save Sirius Group said, "It is clear that management under Mr. Karmazin's leadership has an agenda to steal this company from its shareholders."
Save Sirius complains about Sirius XM's "history of locking their shareholders into the longest merger delay in history," as well as its "preventing the corporation from seeking alternatives or potential suitors" and its failure to commercially introduce interoperable radios while it insisted on "going forward with the merger at any and all costs." It also cites the issuance of 300 million shares "to the financiers of XM's debt to be sold short on the open market" as evidence of Karmazin and the Sirius XM board's doing severe" damage" to shareholder value in violation of their fiduciary duties.
Hartlieb said, "In light of the aforementioned, it is clear that they have lost sight of their obligations to shareholders and have breached and will continue to breach their fiduciary duties in the future. We, as a group, will not stand for this and will use any means possible to prevent and preclude them from stealing this company from its rightful owners -- we the shareholders."
Radio Ink has contacted Sirius XM Radio for comment.