Sirius and XM Shareholder Vote Date Established
As was anticipated in our previous article “Sirius files SEC Form S-4/A” the dates for shareholder meetings to vote on the merger between Sirius and XM have been established. November 13, 2007 is the date that satellite radio investors need to know. Both Sirius as well as XM will be conducting their respective meetings on the same day. Sirius will hold their meeting at 9:00 AM and XM at 3:00 PM. In order to be able to vote, investors need to have been a shareholder of record by a specific date. For Sirius shareholders that date is October 2, 2007. For XM shareholders the date is October 1, 2007. Shareholders can cast vote in person, by telephone, or by Internet. Specific information is available in the SEC filing dated October 4, 2007.
The establishment of a shareholder vote date is important in that not only is it a step required for the merger to happen, but also, in my opinion, gives some indication as to when Sirius and XM are expecting regulatory action on the process. Both Sirius and XM continue to express that they anticipate being able to close the deal in the fourth quarter. For their parts, regulatory agencies have also expressed, albeit in a vague way, a timeline. The FCC has stated that they intend to bring the matter to a vote in the fourth quarter, and the DOJ has stated that they are working as quickly as possible.
One news item that seems to have some legs is that the DOJ is seeking additional information. While some seem to think that this means potential delays, the fact that the DOJ is still gathering information should come as no surprise. The merger is a process, and even though substantial compliance has been certified, it does not stop the flow of information to the Department of Justice. It is quite possible that the Department of Justice may want to see some of the Q3 2007 information from each company, which at this point will likely soon be compiled as the companies prepare for Q3 conference calls.
In my opinion, shareholders may see the quarterly conference calls from both companies prior to the shareholder vote on the merger. This will give shareholders the latest and greatest information available about the various metrics of each company. In the past Sirius and XM have tended to have quarterly calls 6 to 8 weeks after the close of a quarter. This time we may see the calls within a month of the close of the quarter.
All of this sets up what will be a very busy month for investors in the satellite radio sector. Quarterly calls, the DOJ and FCC process, and the shareholder vote could all happen in the next 40 days. Those sitting on the fence are fast getting to the point where they need to make an investment decision, and there are a lot of moving parts to contemplate.
Position – Long Sirius, Long XM
I received an e-mail asking why the Department of Justice would want to see Q3 information from Sirius and XM. The e-mailer felt that because Sirius and XM are not arguing a “failing business” that the Q3 financials would have nothing to do with the merger process. I agree.
Perhaps some clarification is in order.
The quarterly report contains much more than financial data. Retail sales, OEM take rates, churn, and other subscriber data could all be information that the DOJ is interested in.
One of the strong cases that Sirius and XM have regarding substitutionality in the audio sector is their subscriber and churn data. Already the companies have acknowledged that the crossover between the two companies is minimal. Therefore, the churned subscribers are finding what they consider viable substitutes for satellite radio.
If you were the DOJ would you make your decision base on Q2 and back, or would you want to see if the data is still indicating the same trends? Especially if that data is now available.
IMO the data the DOJ could want access to has little to do with the financials.