Liberty Media Buys Shares – Moves Over 50%
Liberty Media purchased 50 million shares and with that purchase is now over the 50% threshold (as defined by the SEC) to have majority control over SiriusXM. There are indeed “other shares” out there tied to convertible bonds, employee stock options, etc. that could dilute Liberty to below 50%, but those are not used in the determination of the 50% stake. Certainly it is good conversation, but the reality is that Liberty Media is now the majority holder of SiriusXM shares and everything else is simply an exercise in chasing snipes.
With its controlling stake Liberty can now change out the Board of Directors if desired, make decisions relative to the status of Interim CEO James Meyer, and essentially drive the direction of SiriusXM inclusive of share buybacks, debt load, debt repayment, and overall strategy. This move was not unanticipated and having it behind us does clear up a few of the uncertainties that previously existed. Using the latest share count from SiriusXM’s last quarterly report, Liberty stands at about a 50.15% ownership stake. Bear in mind there have been a few transactions since that report, so the Liberty stake is likely around 50.5%. See Below for more detail.
With Liberty in control things could begin to get interesting!
Now, most (not all) of the uncertainies have been answered. I think going forward one of the more important questions, for an investor, is how extensive will the share buyback program be. Will it be a 2,3,5,10 year program?
I would think the answer is highly contigent on Siri’s share price, over the upcoming years. Business 101 would suggest buybacks would occur when the perceived valuation is below market price and a refrain if the stock price is above perceived value.
Regardless, I would like to hear an analyst pose the question to management at a future conference. I’ve read where Siri/ Liberty intend to retire 20% of the float, but that came from an analyst’s opinion.
With Maffei stating on several occasions that they expect it to take 18-24 months to recoup $$ spent on acquiring controlling interest. That should answer at least part of the question! 10% of float over next 18-24 months.
JS…
Thanks for the input. I think alot of people assume, for whatever reason, the buyback program will cease to exist after the probable RMT. I’m not so sure that is the case, unless of course the share structure is altered, as part of the process.
Maffei has stated no hurry to spin out SXM. Liberty content to wait until the approx 600M shares is bought back to complete buyback! That’s why at most recent conference that Maffei spoke at…he mentioned 2015 to recoup $$. Probably no RMT until then!!
JS…
I understand your point. The buyback program was, as you suggest, described as a $2 billion program. I suppose my initial inquiry would have been better stated as once the announced buyback program has been completed, will that be the end of the initiative.
My reason for consternation is because Maffei stated, at a past conference, Liberty’s future intentions were to “shrink, shrink, shrink” Siri shares. His next few sentences went on to describe how the company reduced shares of another entity, of which I forget, by a whopping 40%.
I’m not sure if he was trying to draw a correlation between Liberty’s past buyback end results and intentions regarding Siri, but it does raise questions in my mind.
LD…let Liberty cont to shrink Siri shares…as long as we hold…will only put more $$ in our pockets!! My only concern will be how much debt they pile onto SXM to buyback another 10-20% of float!! Just remember…if it hurts the sp…it hurts Liberty as well!!!
i think even though they have a 2 billion credit to draw on, much can be used from cash flow in the next two years too–What id like to see is new product/growth projects as the financials look good
Gary…
My understanding is the credit line is for 1.25 billion and the rest will come from FCF.
Spencer you said “This move was not unanticipated” There are many other moves in the pipeline that you did not anticipate that’s why we are heading to $10 by end of 2015.
Tom….
“The move was not unanticipated” means that it was expected. Please read again and assign the correct meaning.
You expect $10 by the end of 2015. Based on what? What will EBITDA be at to get to a $10 share price? Certainly if you believe so strongly tat the safe price will be at $10 in the next 35 months you have a rational model to get you there.
I dunno bout $10, but I think soon as the share buy backs start, we’re on our way to $5. 😛