Subject: Liberty SiriusXM Group
Have any of you looked into Berkshire’s activities with Liberty SiriusXM Group?

A quick summary of what it looks like to me.

Berkshire has been buying for a reason.
The securities, tickers and entity names involved are quite confusing initially but it all makes sense. In short, if following Berkshire the trade is buy LSXMK. (Could also short SIRI). There is a YouTube video explaining it all.

Effectively LSXMX is merging with SIRI. There is a 20% discount on LSXMK. When the deal closes in the next few months, the discount will close to zero. Either with LSXMK rising or SIRI falling. One thing I’m unsure about, is the debt situation in the transaction. It may reduce the supposed 20% arbitrage opportunity. Anyone care to comment on that??

Risks include:
1. Deal does not happen. This seems very unlikely given John Malone wants it to happen and he is in control. I can’t see any regulatory reason to stop, what is just a reorganisation.

2. A general stock market fall that causes the target SIRI to fall.

3. A negative trading update from the target underlying business.

4. This 20% arbitrage opportunity is less than this due to debt merger agreement.

If the deal does not go ahead, or you decide to hold long term, the economics of the underlying business and its capital structure are very relevant. But less so, if you are speculating on the transaction. The business (subscription based US satellite radio service and music streaming) has been performing okay in recent years and seems to be valued in the market at about 10x earnings. I don’t know much about it but it doesn’t look terribly exciting and perhaps hard to know how it looks 20 years from now. Interestingly, Berkshire does own a small amount in the target, which suggests perhaps it likes the economics: price equation long term. That provides some reassurance for the risks of participating in the arbitrage. You just need the subscribers not to unplug in the next 3 months which is unlikely.

Anyway, wondering if anyone more informed, would comment if the above 20% return opportunity (over say 3 months) from copying Berkshire, is how this looks to you?