The mistake that investors continue to make is comparing Liberty's motives to their own. Investors assume that since Liberty has been Sirius' largest shareholder, they share similar interests -- one that includes an importance of a growing stock price.
The fact of the matter is, Liberty is far from having a retail mindset. Remember, this is the same company that was given 40% of Sirius by merely lending the company $530 million, a loan that Sirius repaid one year later. Yet many continue to assume that Liberty is looking at Sirius from their lens... as in being solely focused on the movement of the stock price. Simply put, that is not the case.
Liberty's Chairman John Malone is now laser focused on maximizing all of the value that remains in the company, which is one that produces a decent amount of cash flow. While that is a great thing for all interested, it is now clear that Malone intends to take it all for himself and his shareholders.
While that may seem like a pretty shrewd position, sadly there isn't anything Sirius can do to stop him. All of the drama that continues to be played through the courts and with the FCC as the battle for control continues is essentially postponing the inevitable.
To Sirius' credit, the company is putting up a decent struggle, but astute investors already understand that it is really not a fair fight at all on many levels -- not the least of which includes intelligence, where clearly Sirius is out of its league. The question is: What are Sirius investors going to be left with? It doesn't seem as if there will be much once Liberty is done.
What is clear to me is that Liberty does not value the stock as much as it values Sirius' current assets including its $8 billion in NOLs. As it stands, the value of the NOLs are worth more now than Sirius' entire market cap.
For retail investors, there are two things working against them. First and foremost is the fact that Liberty has figured out a way to acquire shares without disrupting the market and sending the stock higher as many had expected. Second, not only has Mel Karmazin been selling his shares, but he has become helpless while Liberty is in the process of seizing control of the company.
The sad part of all of this is that all anyone can do is watch. Wall Street has seen this before and we know how it is going to end. The only thing that is not yet known is when. Liberty has every intention of capitalizing on its position and advantage -- even if it means embarrassing Karmazin (again).
The company first exploited a weakness when Sirius was facing bankruptcy and took 40% from Karmazin; it was like taking candy from a baby. Retail investors applauded Liberty for coming to the rescue, but didn't recognize that it was a Trojan horse.
Since then Liberty has waited patiently for three years, biding its time while saying all of the right things. Now it sees another opportunity to take control of the board and manipulate the company in a manner that suits its long-term objectives. Remarkably, it is able to do this by using Sirius' own money.
Essentially, Sirius is getting "punked" and retail investors are going to be the ones left holding the bag. It certainly won't be Karmazin or any of the insiders as they have been dumping shares since the start of the year. It seems plausible they saw the writing on the wall and acted accordingly.
Karmazin recently said he would do his best to prevent Liberty from gaining control of the company. He forgets that one of his (limited) options at this point is to not sell his stock; selling essentially making it easier for Liberty.
This makes me question whether or not Karmazin really had it all together. For someone who is viewed as a god by Sirius' faithful investors, he has shown to care very little about the welfare of these same investors. But then again, it is hard to look brilliant when the opposition is John Malone. Sadly for investors, if they didn't know who he was, they do now.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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