Dissident shareholder Michael Hartleib is after headlines by announcing his lawsuit against Mel Karmazin and other officials of Sirius XM, claiming that they’re out to “steal” the company from other shareholders. But Hartleib has made most of these claims before – without success.
Although Hartleib put out a press release yesterday stating that shareholders had filed suit against Sirius XM management, he actually filed the federal lawsuit back in July, alleging violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), securities law, the Federal Communications Act, common law fraud and the Sherman Act. Sirius XM responded that the lawsuit didn’t raise any claim that would amount to a violation of law and a federal judge last month granted a motion to dismiss the lawsuit, but gave Hartleib 20 days to file an amended complaint. That’s what he has now done.
The amended complaint is pretty similar to the original, this time making claims under RICO, the Sherman Act and also alleging breach of fiduciary duty. In short, the suit claims that Sirius management deliberately violated the FCC requirement for interoperable receivers with former rival XM and stifled competition to achieve a monopoly. But in winning approval to merge with XM, they allegedly acquired a massive debt load under bad terms and drove down the value of Sirius XM.
Hartleib claims he and other shareholders were damaged by the merger and will be further diluted by the coming refinancing of the merger debt. The amended lawsuit calls for the merger to be unwound. He’s also out to block the proposed reverse split which shareholders have been asked to approve.
“We are working to gain control of our company by seeking to remove current members of the board as well as top executive Mel Karmazin,” said Hartleib, whose Save Sirius organization claims to represent over 500 shareholders.
RBR/TVBR observation: Let’s get serious. Sure, Mel said he’d like to take the company private. What CEO wouldn’t? But if he were trying to beat down the stock price would he have bought two million shares in August for over $1.37 each? If he’d been trying to manipulate the price, he could have waited until now, bought the two million shares and saved about $2 million. (Or spent it all for nearly eight million shares.)