SiriusXM shareholders directors should have taken measures to prevent a takeover by Liberty Media, extracted a takeover premium and allowed a shareholder vote on the deal, the judge in the case heard this week.
“Malone wanted to enjoy all the economic benefits of being a controlling shareholder without having any of the responsibilities,” Mark Lebovitch, a lawyer for investors said in a hearing that may allow investors' claims to proceed, according to Bloomberg.
Liberty Media lawyer Donald Wolfe told the judge shareholders don't have a case because the 2009 agreement doesn't give SiriusXM directors the right to prevent a takeover.
Shareholders sued the SiriusXM board of directors in August 2012 for failing to create strong anti-takeover defenses that would have prevented Liberty from taking over the company. Investors contend Malone was prohibited from attempting to gain control of SiriusXM for three years after the $530 million loan from Liberty that helped prevent the company from slipping into bankruptcy.
Lebovitch, an attorney for some SiriusXM shareholders, had not responded to a request for comment at press time. A SiriusXM spokesperson declined to comment.
The loan helped pave the way for Liberty Media's eventual takeover of SiriusXM. In May 2012, more than three years after the loan was announced, Liberty revealed it would increase its stake in SiriusXM to roughly 43%. Its stake had increased to 49.7% by September and passed the 50% threshold in January.
Liberty applied for FCC approval to take over SiriusXM in August 2012 and was granted permission in January.
Liberty's involvement with SiriusXM has coincided with an extraordinary rise in SiriusXM's share price and financial performance. Just a few years removed from the financial crisis that necessitated Liberty's loan, SiriusXM posted net income of $126 million in the second quarter and is on track to generate $915 million of free cash flow in 2013. The company's shares stood at $3.62 on Thursday, up over 2,160% from the $0.16 price on the day the Liberty loan was announced.