As SiriusXM tumbles down, there are many investors that are frustrated. Not a day goes by that I do not receive communications from investors regarding the company and the proposed transaction with Liberty Media. To my surprise, most of those that contact me really do not understand this deal. These investors are hung up on stock price when what they should be focused on is the ratio. Even some class action law firms do not seem to understand the deal, or worse, understand the deal, but use the investor confusion to "rile up the troops" in hopes of finding the best lead plaintiff possible. It is actually quite sad...And ironic.
Think about this. The very board of directors that SiriusXM investors have said was doing the right things for the business are now being accused of breaching their fiduciary duties before they even get a chance to do them. Taking it a step further, the very same board of directors that would be running the company very well as a stand alone in the years ahead (according to some investors) is suddenly not doing the right thing with regard to the Liberty Media transaction. Does that make any sense at all? On one hand you trust these guys well enough to get the stock to $4.50 a year from now, while on the other you are saying that they are not capable of their job with respect to this deal. I will say it. These investors are not making sense, and are reacting on emotion rather than common sense.
How many law firms have lined up to "investigate" this action. One firm in Boston, Block and Leviton, has even gone so far as to publish this:
"Block & Leviton LLP, a Boston-based law firm representing investors nationwide, has commenced an investigation into possible breaches of fiduciary duty by the Board of Directors of Sirius XM Holdings Inc. (“SiriusXM” or the “Company”) (NASDAQ: SIRI) concerning the proposed acquisition of the Company by Liberty Media Corporation (“Liberty”) (NASDAQ: LMCA), in a transaction valued at approximately $10.6 billion. The investigation is also seeking to determine whether Liberty aided and abetted the Company’s breach of fiduciary duties. Under the terms of the proposal, Liberty would acquire each Sirius XM share for 0.0760 of a new share of Liberty Media Series C common stock, valued at approximately $3.68, a paltry premium of less than three percent wrought through Liberty’s domination of SiriusXM as the Company’s majority stockholder. Liberty’s CEO Greg Maffei bluntly stated “This is not a change of control: We already control Sirius XM.” Liberty, by virtue of this controlling stake in SiriusXM, has shown no interest in paying an appropriate premium to minority shareholders in the Company."
1. The firm is launching an investigation about a breach of duties on the very day that the proposed deal was announced. Interesting. Common sense would dictate that the board had not yet even had a chance to even begin their duties.
2. The firm is investigating whether Liberty Media aided and abetted the supposed breach of duties that the company had not even yet had a chance to begin? HMMMMM.
3. The firm states that Liberty would acquire each SiriusXM share for 0.076 shares of a new series of Liberty Media C series share. This is really not an accurate way to portray the deal. The SIRI shares will no longer exist, and the SIRI shareholder will still hold stock. SiriusXM investors would now be invested in Liberty, of which SiriusXM will be a part.
4. The law firm goes on to bring the $3.68 figure, that was really only appropriate on the day the announcement was made and based on the closing price of Liberty and the closing price of SiriusXM. This is a ratio deal. This is a stock swap deal. It is not a deal that would pay on future value.
I could go on and on. What I see here are law firms throwing darts in hopes of getting status with this case. In my opinion these firms are being opportunists and in many cases confusing shareholders more-so than guiding them appropriately and helping them understand. After all, guiding shareholders is not a profitable business. Getting a settlement is where the money is. Throw an investigation up for any and every deal in America and hope that you score on a few. It would appear that it does not matter if the investigation has no merit. Many of these firms simply cast a wide net and hope. Often that hope is in finding a great lead plaintiff with standing. They do not wait for a company response, the opinion of analysts, or the opinion of experts. They throw their net out there and hope that someone messes up.
Think about this. Isn't it telling that the major institutional owners of SiriusXM have not been jumping up and down in droves? Isn't it interesting that subsequent to his knee-jerk reaction to the news that Ralph Nader has gone silent? Perhaps...just perhaps...with a little bit of time to digest the news, more and more people realize that this is not a buyout, but rather a swap. This is trading a BMW for a Mercedes, or visa-versa.
Before jumping up and down, ranting, raving, and running off to join the latest class action firm to hand you a lollipop, get the information in hand, and consider the irony that the same independent board members you had all of that faith in is the same independent board members that are hiring the consultants and attorneys to assess this offer. Sue them before they even start the process? Very telling. Very telling indeed.
I have stock in both companies. I do not endorse the deal yet, but realized years ago that this day would come at some point. What I endorse is understanding the deal and the dynamics before I cast my vote. We simply do not have that information yet.