Sirius XM Can't Shake Liberty's Pursuit

Forget de facto control. Liberty Media (Nasdaq: LMCA  ) is closing in on actual control of Sirius XM Radio (Nasdaq: SIRI  ) .

In an SEC filing on Tuesday night, Liberty Media revealed that it has purchased nearly 90 million shares in the open market since Friday of last week. That brings the company's common share stake to 452.5 million, but that's not all.

Liberty Media already owns a 40% preferred share stake in the company, and Tuesday's filing shows a forward purchase contract transaction from Friday for another 46.1 million shares that expires in two months.

In short, Liberty Media's effective stake in Sirius XM has grown from 40% to roughly 48% in a matter of months.

Liberty Media applied for de facto control earlier this year, a move that would allow it to ultimately spin off its stake to investors in a tax-advantaged manner. Regulators initially scoffed at the request, but one way or another, John Malone's going to gain control of the satellite-radio giant.

Investors don't seem to be troubled by the drama. The stock hit a fresh four-year high today. Fears that Liberty Media will flood the market with shares have been offset by the likelihood that Sirius XM will use its improving free cash flows to repurchase shares if the float gets out of hand.

After all, the larger Liberty Media's stake grows, the more it has to gain from Sirius XM's increasing shareholder value.

These are still interesting times. Sirius XM is now the only satellite-based entertainment provider that's growing its domestic user base, after satellite-television leaders DirecTV (NYSE: DTV  ) and DISH Network (Nasdaq: DISH  ) suffered net cancellations during the second quarter.

Skeptics who would value Sirius XM relative to satellite-television providers have overlooked the advantages of a model where the broadcaster owns most of the content.

The saga still bears watching. Now that Liberty Media is closing in on outright majority control of Sirius XM, it won't be long before it has to lay down its cards to show the market what it's holding.

Running of the bulls
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