There are several reasons behind the strategic decision to offer up $530 million of funding to keep Sirius XM out of the clutches of Chapter 11 bankruptcy. Let's go over what appear to be the four biggest reasons.
1. It's a smart money move
"Initially it's a financial play," explains Malone, when asked what's in it for Liberty. He's right. This isn't just $530 million for a 40% stake in the company. Sirius XM has to repay the loan, mostly at a steep 15% interest rate. Malone wasn't going to get that kind of return elsewhere.
2. There aren't a lot of choices out there
"Sirius XM's the only example of someone that's in our space that's waving the white flag and willing to take in substantial capital at market rates," Malone tells the paper. Despite the beating that media stocks have taken over the past year, with some on the cusp of bankruptcy, it's apparently still a sector where the players are too proud to panhandle.
3. The pieces fit
Malone also describes the move as "strategic" given Liberty's other investments. "Obviously we have a large stake in DirecTV
Analysts have been talking about the possibility of bundling DirecTV satellite television with Sirius XM satellite radio, but Malone doesn't appear to be in a hurry to connect those dots just yet.
Given Liberty's portfolio -- with stakes in companies like Ticketmaster
4. It keeps a toy away from rival Charlie Ergen
Until Malone stepped into the bidding war for Sirius XM, EchoStar's
But he hasn't closed the door on working with Ergen to cash in on Sirius XM in the future. "If Charlie has a great idea on how to exploit the asset, we may end up doing something with Charlie," Malone tells the Denver Business Journal.
However, Malone clearly wants to be the gatekeeper of those discussions. He definitely fills that role right now, and so much more.
More news than static on Sirius XM:
Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.