Most stocks fell Tuesday, but Sirius XM was up sharply, even more than double Friday’s close of 10 cents at one point in trading. Investors jumped in as John Malone’s Liberty Media came up with money to keep the satellite radio company alive. Unwanted suitor Charlie Ergen at EchoStar was due to be paid off yesterday as his bonds came due. The Chapter 11 filing that bankrupty lawyers had prepared for Sirius XM will remain unused in someone’s computer. Now, Malone and Sirius XM CEO Mel Karmazin have to get down to solving the real problem – how to make the subscription satellite radio business turn a profit.
"We are excited to be investing in Sirius XM. We have been impressed with the company, its operations and management team. Sirius XM’s ability to grow subscribers and revenue in a difficult financial and auto market is indicative of how listeners view this as a ‘must have’ service," proclaimed Greg Maffei, President and CEO of Liberty, in a joint press release. Both he and Liberty Chairman Malone are expected to join the Sirius XM board of directors.
“We are pleased to have come to this agreement with Liberty Media, particularly in light of today’s challenging credit markets. Liberty’s investment is an important validation of what Sirius XM has already achieved and a vote of confidence in what we will achieve. This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM. By strengthening our capital structure and enhancing our financial flexibility, this investment allows us to continue providing the great content and innovative programming our subscribers know and love,” said Karmazin.
Wall Street was jubilant at the breath of life that Liberty injected into Sirius XM. The stock more that doubled from Friday’s closing price in trading. It closed at 16 cents per share, up 52.5% for the day.
Financial details of Liberty Media’s rescue of Sirius XM – click here.
RBR/TVBR observation: As far as we’re concerned, the big winners in this were Charlie Ergen and Howard Stern. Ergen gets paid full face value for bonds that he bought on the cheap. And, unlike John Malone, he doesn’t have to try to make a silk purse out of the sow’s ear that we know as satellite radio. As for Stern, Sirius XM is now guaranteed to survive long enough to finish paying the remainder of his five year contract for well over a half billion bucks.