If you thought that the SIRIUS XM Radio Inc. (NASDAQ: SIRI) situation couldn’t get more complex, it could. It has. Reports of it getting ready for bankruptcy, and then getting a controlling debt investment from EchoStar Corp. (NASDAQ: SATS) and Charles Ergen only made matters worse. And now this morning comes reports that SIRIUS XM is in talks with Liberty Media Interactive (NASDAQ: LINTA).
Dare we bother throwing in that an activist shareholder is still trying to go after the company? John Malone could come to the rescue here. But with all the restructuring that has been seen in Liberty and with all of the issues in the media world right now, he might have more than hesitation. And raising cash to do this with other people’s money is less of an option today.
Liberty is already majority owner of DirecTV (NYSE: DTV), and it already has a relationship with SIRIUS via XM. The structure of this gets extremely complicated. There is no talk yet of what the dollar amounts might be, what happens to existing shareholders of the common stock andwhat happens with upcoming debt maturities.
We listed Mel Karmazin as a CEO that needs to go. We were credited as using price as the only metric for the call, and that could not have been further from the truth. Karmazin’s buyout of XM took far longer than expected and the companies both stayed on a path that did not make them financially viable.
If SIRIUS goes into Chapter 11, common stockholders will get more comfort that their share certificates will sell on eBay and they can make money on the shipping and handling in the auction. They are already trading as though they are nothing more than a warrant with a strike price that is almost impossibly out of the money.
Satellite radio’s future, at least as far as the SIRIUS XM of today, is challenging. The service will survive. But the common holders have more than just a few worries.
Jon C. Ogg
February 12, 2009