Sirius XM announced that current shareholders won’t get to vote on the deal giving Liberty Media a 40% equity stake as part of a $530 million funding deal to keep the satellite radio company out of bankruptcy court. Sirius XM says Nasdaq granted a waiver of its rule requiring a shareholder vote because the delay of securing shareholder approval would seriously jeopardize the financial viability of the company.
“Sirius XM Radio announced today that Nasdaq had granted the Company’s request to issue new preferred stock in connection with its previously announced agreements with Liberty Media Corporation without shareholder approval,” Sirius XM said in a press release on Thursday.
The Liberty Media investment will be funded in two phases. Upon completion of the second phase, Sirius XM will issue Liberty an aggregate of 12.5 million shares of preferred stock convertible into 40% of the common stock of Sirius XM.
“While the Nasdaq rules generally require shareholder approval prior to the issuance of securities that are convertible into more than 20% of the outstanding shares of a listed company, the Company is relying on an exception in cases when the delay in securing shareholder approval would seriously jeopardize the financial viability of the enterprise. The Company’s Audit Committee has approved the use of this exception,” Sirius XM said.
Dissident shareholder Michael Hartleib called the Nasdaq waiver “outrageous,” but typical of the company’s lack of regard for the interests of its shareholders. “This board absolutely should not be trusted,” he told RBR/TVBR. He noted that the Malone deal doesn’t bail-out the company long term – “it just buys a little bit of time.”
RBR/TVBR observation: Are there any rules that satellite radio companies are going to be made to follow? Both Sirius and XM violated FCC rules for every day of their existence and finally got a slap on the wrist, requiring them to pay only a modest fine to get their merger approved. The Justice Department’s antitrust “watchdogs” approved the merger precisely because the two companies had not complied with their FCC licenses and used receivers which would have allowed consumers to switch freely between them. Now Nasdaq lets them get away with not allowing shareholders to vote on a deal to dramatically dilute their equity. What next?