Tax implications for Liberty!!!!
I thought this article explains liberty;s interest in Sirius ...They will make sure sirius survives for 3 years at least.. WSJ .com article 2/20/09 8:07pm
Some investors are baffled why media titans John Malone and Charles Ergen are competing to throw money at Sirius XM Radio Inc., the money-losing satellite-radio company that was perilously close to bankruptcy.
But in fact, the company's most valuable asset could be precisely all the money it has lost.
Sirius XM has at least $6 billion of tax losses, according to securities filings. That means that the losses it has accumulated over the years can be used as deductions to cut taxes on future profits. As long as those losses stay with Sirius, they have little value, securities filings show, because the company's future prospects for significant profits are still slim.
But in the eventual hands of another company, like Mr. Malone's Liberty Media Corp., those tax losses could become extremely valuable, helping to wipe more than $6 billion in taxable income off of its income tax returns -- thus some day cutting Liberty's corporate income-tax bill by more than $2 billion.
Tax concerns are often a big driver of corporate deal making, but few players maneuver through the tax code as thoroughly as Mr. Malone. In 2006, he acquired the Atlanta Braves in a way that enabled Liberty to effectively cash out its stake in Time Warner without incurring taxes.
Similarly, Sirius's tax losses are considered a key part of the company's appeal to Liberty, according to people familiar with the matter. They were considered less significant to Mr. Ergen, who bought up Sirius debt in hopes of adding Sirius to his strategic arsenal of satellite assets. On Tuesday, Liberty announced it would rescue the company from a bankruptcy filing with a $530 million loan. Liberty will receive a 40% stake in Sirius.
Companies often have tax losses. But experts say it is unusual that they are potentially a firm's most valuable asset, as with Sirius. The only asset that is comparable is the company's collection of radio wave spectrum licenses granted by the Federal Communications Commission valued at $2 billion, according to a Sirius securities filing. "That's uncommon that the [tax loss] would be ... the most valuable asset," said Robert Willens, who runs a corporate tax advisory firm.
However, for Liberty to maximize the use of those tax losses, it must navigate Internal Revenue Service rules intended to prevent companies from acquiring others solely for their losses -- so-called "trafficking in losses."
Indeed, that issue is getting renewed attention: In late September, the Treasury Department lifted those tax-loss restrictions for some companies to encourage a spate of bank mergers. Congress effectively repealed Treasury's move for future bank deals as part of the recent stimulus package.
The IRS curbs already kicked in after the Sirius XM merger was closed in last July and limit how much of the losses can be used as tax deductions each year.
Based on those rules, Mr. Willens estimates that, for the first five years that the tax losses could be used, Sirius is limited to about $580 million a year in deductions stemming from the losses. After that, it drops even lower, to about $250 million a year for the next 15 years. Thus, all the losses would be used, but not immediately, which reduces their effective value. People familiar with the matter confirmed that those estimates are in the range of the company's working projections.
Another complication hangs over these tax losses. If ownership of the company changes again, the use of the tax losses would become even more limited, according to IRS rules. That is because the restrictions are calculated based in part on the market value of the company -- which is roughly 10% of what it was when the Sirius XM merger closed.
Under IRS rules, the restrictions on the use of the tax losses kick in if the company's major shareowners increase their ownership stakes by more than 50 percentage points. Liberty's current 40% investment is restricted to no more than 49.9% for the next three years, which prevents the Liberty deal from triggering another ownership change.
There is an additional wrinkle: If another investor purchased enough stock to give it a stake of 5% or more during the next three years, that could combine with Liberty's stake to trigger those restrictions anew. Sirius can implement trading restrictions to prevent that. At current values, a new restriction on the losses could cause Sirius to lose about 80% of its tax losses over the next 20 years, according to Mr. Willens.
Absent such changes, Liberty would then be free to acquire the rest of Sirius in three years and use all the losses to shelter taxable profits elsewhere.
Estimate of retail and oem subs. Still looks good
3.3 radios per day for 1000 stores (conservative)=3300 per day for 356 days=1,174,800 radios. add in 2.5 car activisions= 3.67m installs in a year-churn and you get still a very good picture of subs
http://www.thechannelcheckers.com/20...-slowing-down/
Sirius Satellite Sales Slowing Down
Filed Under Satellite Radio
We surveyed 30 electronics stores in the past week (8 Best Buys and 22 Radio Shacks). We found that each store on average was selling 3.3 Sirius units per day, with a low of 0 per day and a high of 10 per day at one location. 73% of respondents reported that sales of Sirius units were slowing down, while 17% claimed they were increasing.
We are conducting a follow up report tracking consumers purchasing trends for Sirius to identify if intended use is for the car or home/personal use. For access to the underlying survey or for more information, please contact Jason Katz at 415.867.0959 or jason@thechannelcheckers.com
Since we are all sirius junkies why not go to stores
like best buy and radio shack. circuit city does not count goes they are in bankrupcy. then we can all report back. my guess we will get a pretty good idea of how many radios are being sold on a daily basis.
