As has been expected for months now, Liberty Media (NASDAQ:LMCA) closed on its forward purchase contract. There was no real science here, nor any real predictions that needed to be made. This forward purchase date was set in stone on May 7th when Liberty filed with the SEC that its third party partner had finalized its hedge and the number of shares was identified.
I know there are the conspiracy theorists out there (I enjoy the emails) that were looking for something deeper in all of this. Simply stated it did not exist. In December of 2011 Liberty Media entered into a forward purchase contract for up to 315 million shares of Sirius XM. The key words here were “Up To.” By structuring the deal this way there was no filing required until such time that the terms of the deal (i.e. the number of shares) were determined.
On May 7th the third party closed its hedge, and the 302 million share total was disclosed as per regulation. From that point forward it was well known that July 6th was the important date when the notional shares of the contract would be converted into real shares.
Was the structure of the deal shrewd? Certainly. Was the timing of the announcement of the deal savvy? The answer would be a resounding YES. Can anyone blame Liberty Media for being shrewd and savvy? NOPE! While some holders of Sirius XM that were seeking a premium may be disappointed with what has transpired, it does not make it wrong, untruthful, or against the law. Where the appointment’s should be is that investors many of these investors did not have the foresight to understand that a huge premium was never in the cards. Consider it a lesson learned and now apply that knowledge to the next steps.
Next on the agenda for Liberty Media is the decision of the FCC regarding de facto control. If that happens, Liberty will convert almost half of its preferred shares into common shares within 20 days. This is a fact. Take it to the bank, and understand it now. This move will give Liberty voting power that represents 200 million more shares than voted for any board member in the last 3 elections. Yes, Liberty will lose a couple of board seats upon conversion, but its own slate will be installed in short order.
Is Liberty done buying shares? That depends on the FCC and the ultimate plans of Liberty. Currently its “as converted” stake sits at 46.2%. The only way to know if Liberty is done is to know what Liberty’s plans are. As yet, that information is not available.