Well, it works the same every single time! As a merger or acquisition happens there will always be law firms that seek out a way to capitalize on it. The latest has the law firm of Wohl & Fruchter announcing that it is launching an “investigation” into the SiriusXM (NASDAQ:SIRI) and Liberty Media (NASDAQ:LMCA) control situation.
To be clear, I am going to outline OPINION here. It is my opinion that Wohl & Fruchter are more likely in search of the perfect shareholder (lemming) than an actual investigation into the details of the control issue between SiriusXM and Liberty. You see, they need a shareholder (lemming) with the proper standing in order to make a viable case. They need a shareholder (lemming) that will say the right things, has held the equity for the proper length of time, and is willing to continue to hold the equity throughout the course of this investigation as well as potential litigation. What better way to find that shareholder (lemming) than to issue a press release asking shareholders (lemmings) to contact the firm.
The investigation, or at least a substantial part of it, will likely center on interviewing shareholders (lemmings) to get all of the proper legal ingredients in place. Guess what? They will be successful in that endeavor. There are plenty of lemmings (shareholders) out there that will fit the bill. In my opinion this firm is simply seeking the lemming (shareholder) that gets closest to being the average person. Let me be clear, not all SiriusXM shareholders are lemmings, but any equity has its fair share of them. It is the lemmings that will respond to this “investigation.” Real shareholders have known that Liberty would gain eventual control since the day the 40% stake deal was struck.
Ironically, many aspects of this “investigation” have already been addressed by very high courts in the Blessing and Shenk lawsuits and subsequent appeals. The existence of these suits actually lessens the odds that a new one will have any real luck it even getting off of the ground.
So now we have according to the law firm:
“Our investigation concerns whether Liberty Media and the board of directors of Sirius have complied with their fiduciary duties in connection with Liberty Media’s efforts to acquire majority ownership of Sirius, including the failure by the board to adopt takeover defenses, take other steps to prevent Liberty Media’s acquisition of majority ownership, or impose conditions for the benefit of Sirius’ public shareholders.”
This is actually quite clever. the firm is bringing in Liberty Media, when the true underlying question is with SiriusXM. When the Liberty bailout happened, Liberty Media had no responsibility to SiriusXM shareholders at all. Their sole responsibly was to Liberty shareholders. The provisions of the anti-takeover measures were outlined prior to Liberty Media having any responsibility to SiriusXM shareholders. In essence this investigation is contemplating a suit against the SiriusXM Board of Directors. However, it is kind of tough to find a “fan” of SiriusXM stock to sue the company that they love.
It is true that Liberty Media is immune from a poison pill. Perhaps it could be argued that SiriusXM should have never allowed this condition to be included, and that stance may have merit, but does it really cause damage to anyone? These are things that were already argued and heard in earlier cases. Even the fact that Charles Ergen had a proposal on the table has been discussed.
Let’s assume for a moment that the SiriusXM situation mirrors closely the transaction between Liberty Media and DirecTV. Did that not wind up allowing everyone to see a positive impact? Did it not remove a large shareholder (Liberty) from the DirecTV equation? How do we know that the Liberty plan for SiriusXM might not take this company to the next level?
We will see these things continue to happen, and of course they will cost SiriusXM money in the process. If the law firm of Wohl & Fruchter has a response that outlines the scope of this “investigation” than I would be more than happy to publish it in fairness.