Some shareholders are trying to get a Delaware Chancery Court judge to delve deeper into the 2009 agreement that ultimately led to Liberty Media (NASDAQ:FWONA) taking control of the satellite radio provider.
As a quick refresher, Sirius XM was hurting for cash in early 2009. Despite having finally completed the merger between Sirius and XM months earlier, the company's shares traded for as little as $0.05 with the threat of a bankruptcy filing in the air. There were heavy debt repayment milestones looming, and the profitless company had yet to realize the post-merger synergies it is enjoying today.
John Malone's Liberty Media was one of the two public suitors. DISH Network's (NASDAQ:DISH) Charles Ergen was the other. Both media moguls knew that Sirius XM was desperate, and shelling out a 40% preferred share stake in Sirius XM to Liberty Media in exchange for letting it borrow $530 million at a stiff 15% interest rate seemed better than the alternative of filing for bankruptcy.
It's going to be hard to argue that Sirius XM shareholders were hurt by the deal. The stock's a 70-bagger since bottoming out at the time, making it one of the market's biggest winners. Shareholders buying in before Liberty Media's bailout were eyeing the possibility of being wiped out in bankruptcy proceedings. Those buying in after the infusion knew what they were getting into. Liberty Media agreed to wait at least three years before considering an increase to its 40% position. It waited. It got hungry. Regulators approved the feast that resulted in Liberty Media taking majority control of Sirius XM earlier this year.
Life hasn't been so bad for Sirius XM since Liberty Media acquired the shares needed to own more than 50% of the company seven months ago. The 13% gain in that span may not be scintillating, but it is ahead of the S&P 500's 10% return. Despite losing CEO Mel Karmazin late last year, Sirius XM has been resilient, recently striking an intriguing acquisition that will make it a bigger player in telematics.
There will always be dissatisfied shareholders, and one can rightfully argue how much higher the stock would be it wasn't for Liberty Media's loan shark terms. In terms of market cap, Sirius XM's stock would be 67% higher if the 40% preferred share stake didn't exist. However, that's only if we were sure that Sirius XM would've made it over the hump without Malone's money. No one was bellyaching then, and the only reason folks are complaining now is because Sirius XM has proven itself to be a worthy media darling.
You can't please everybody it seems.