Happy Trails, Mel, and Thanks for the Happy Returns
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
SIRIUS XM (NASDAQ: SIRI) CEO Mel Karmazin recently announced his plans to clean out his corner office, effective Feb. 1, 2013. It appears as though Liberty Media (NASDAQ: STRZA) CEO John Malone has finally wore Karmazin down.
These developments really should come as no surprise to those loyal, 300-plus people that visited my post concerning the drama with these two (“Real Housewives Reality Show Considering Wall Street?”). What’s of somewhat mild interest to note is that since that article (June 14th), Liberty Media is up over 30% and SIRIUS is up over 50%. Maybe it’s time I start reading my own material!
While the stellar stock performances have me scratching my head, I’m also curious as to what relevance the Feb. 1st date has, if any. Quite possibly it’s some significant anniversary for Mel, at which point he gets the matching company cuff links and tie clip (another 10 years and he gets the watch). Maybe it’s at the behest of Howard Stern, as the two have been a truly successful team throughout the years. Or perhaps it’s an acceptable, agreed upon time for the transition process with Karmazin’s replacement.
Liberty Media is currently flirting with 52-week highs, trading between $73 and $114 in that time span, and has had a glorious 2012, with the stock up over 40% since the year began. And SIRIUS has been rolling along in similar fashion, with a 52-week range between $1.61 and $2.97, and is up over 50% since we rang in the New Year.
Liberty Media’s Malone has emerged the “victor” in his alpha-male battle with Karmazin, as his company has been accumulating enough shares necessary for a majority stake in SIRIUS since the $530M “bailout” he provided in 2009, much to the chagrin of EchoStar Chairman Charles Ergen. Since that difficult union came about, both Malone and Karmazin have led their respective companies to some serious returns, with each stock up over 2,000% since February 2009.
Malone has made it public knowledge that he intends for Liberty Media to gain a controlling majority (provided the FCC approves) of SIRIUS, and eventually spin-off the XM radio company. If this sounds familiar, that's because it’s exactly what Liberty Media is currently undertaking with the company’s Starz unit, and it's an ongoing theme with Malone over the past several years (see Liberty Global and Liberty Interactive). The current spin-off of Starz will afford loyal Liberty Media shareholders a dividend in the form of 1 share for each share owned. The stock price won’t necessarily split in half (as it would with a 2-for-1 split), but it will fall with the decreased market cap that comes from Starz becoming a separate company (estimated market cap for a stand-alone Starz is around $2 billion).
Mel Karmazin has been good for SIRIUS, but the stock would be nowhere near what it is today without John Malone and Liberty Media. These two have been exceptional at increasing shareholder value over the years, and I can’t wait for the upcoming earnings calls (Oct. 30 for SIRIUS, Nov. 6 for Liberty Media), so I can gain some insight and hear the potential plans for the companies going forward. I have been a long-time shareholder of SIRIUS; I just wish I had done my homework with Liberty Media when they grabbed a 40% stake of the satellite radio company I enjoy each day.
Interested in Additional Analysis?
Despite being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for Sirius XM -- and plenty of room to fall if things don't. Read all about Sirius in The Motley Fool’s brand new premium report. To get started, just click here now.
kmet312 owns shares of Sirius XM Radio. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.