Sirius XM (SIRI) CEO Mel Karmazin’s behavior seems to be getting weirder by the day. Karmazin has his legal team fighting hard to keep Liberty Media (LMCA) from taking over his company, and he’s selling off a large block of Sirius stock at the same time. In other words, he seems to be facilitating the very thing he supposedly wants to stop.
On Friday, May 18, 2012, Karmazin apparently sold 17 million of his Sirius stock options off. The main beneficiary of that action would be John Malone, the owner of Liberty, who needs to buy up 51% of Sirius to gain control of it. The FCC has told Malone that he can’t take ownership of Sirius’s licenses without a majority stake in the company.
So it seems like Karmazin is not only helping Malone take over his company, he’s profiting from it. Karmazin made around $33.66 million from the sale because the shares were worth between $1.97 and $1.98 a piece when he sold them. At the close of trading on the 18th, Sirius shares had fallen to $1.87. If Karmazin had waited, he would have lost money. This behavior seems designed to help Malone in two ways: first, it gives him more Sirius stock to buy up. Second, it is driving down the price of Sirius, which also makes Malone’s takeover bid easier. The real victims here are Sirius shareholders, who are losing value.
If this bizarre behavior continues, Sirius looks like it will keep falling perhaps to $1.50, and maybe even lower than that. If that happens, a Liberty takeover is almost guaranteed. It also means that Sirius could lose more of its value, even though it has done very well. This situation definitely bears watching because Karmazin still has another 32 million Sirius stock options that he can unload. The question is if he will he sell them or not, and my guess is that he will. This dumping of stock probably indicates that Karmazin thinks Liberty will soon get control of Sirius and that Mr. Malone will give him the boot, so he’s cashing out.To continue reading, click here.