NEW YORK ( TheStreet) -- I've been highly critical of Sirius XM's ( SIRI) management for the past several years. While the company has installed new leadership that brought about new optimism, it's become apparent that this story hasn't changed all that much, if at all.
Although Sirius stock has certainly done well over the past 18 months, during that span much of the gains have been the result of the company aggressively buying back its own stock, worth an estimated $2 billion. When you add the activity related to Liberty Media (LMCA), which spent all of 2012 working its way up to majority ownership, it's hard to find anything impressive about Sirius' organic growth.
Ralph Nader, however, sees it another way. The longtime consumer advocate, a Sirius XM shareholder, believes these shares should be trading higher. He calls Sirius "a fast-growing company with bright indicators."
This explains why he has come out fighting against John Malone, chairman of Liberty Media.
Last Friday, after Sirius stock closed at $3.57, investors received news of Malone's $3.68-per-share bid to buy the remaining portion of Sirius that Liberty does not already own. At the time, this represented a feeble 3.1% premium to Sirius' closing price of $3.57, or 12% below Sirius' 52-week high of $4.18 achieved two months prior.
Not to get too deep into the complexities of the bid, which has a million moving parts, Nader wasted no time calling the offer "ludicrous" and reaching out to activist investor Carl Icahn for help. In a Wall Street Journal article, Nader said: "I am sure that I along with other shareholders in Sirius XM will be interested in a legal challenge to John Malone's company for low-balling Sirius XM's shareholder value."
Carl Icahn, take notice and interest.
It's not the first time Nader has taken the investor activism route to enact change. Three years ago, Nader sent a letter to Cisco's (CSCO) CEO John Chambers expressing his frustration over the company's lackluster 10-year performance. In his letter, Nader reprimanded Chambers not only for his poor execution, but demanded that Cisco return cash to its shareholders.
In that letter, Nader wrote: "It is time for a long-overdue Cisco shareholder revolt against a management that is oblivious to building or even maintaining shareholder value."
Since that letter Cisco's stock soared by as much as 90% and the company has become more generous with its dividend, raising its payout twice in the past two years.
So it is understandable that Sirius investors may now have put their faith in Nader and Icahn, praying they both can extract a higher premium from John Malone.
While Icahn, who does have a long history of making companies uncomfortable, brings a big baton to the table, he also has some defeats on his resume. He most recently lost a tug-of-war with Michael Dell and Silver Lake Partners, which thereupon took the struggling Dell computer company private.
In the case of Cisco, Sirius investors shouldn't go overboard into thinking that Nader's letter was somehow the catalyst to Cisco's performance improvements. I think it's a mistake that the real issues with Sirius' story are being deflected to what has -- I believe -- become a sideshow.
Here's how I see it: Current management has done okay over the past year defying the odds and growing free-cash-flow, especially in the face of cheaper alternatives such as Pandora (P). But there are still operational concerns about Sirius' business model. I believe the company's growth, which has begun to slow, has had more to do with stronger-than-expected auto sales and very little to do with the company's own execution.
I don't expect many, if any, investors will agree with this. But how do you explain that the company missed on its 2013 guidance for self-pay net additions (guidance of 1.6 million vs. 1.4 million actual)? Wasn't this the metric that management advised shareholders to focus on during the year? However, in the company's press release on Tuesday, the self-pay net additions were mysteriously omitted from the 2014 guidance.
The bottom line is this: I have mixed feelings about having activist investors engaged in a stock I own. As an Apple (AAPL) shareholder, I'm not going to ignore the market cap Apple gains each time Carl Icahn sends out a tweet. At the same time, I won't ignore the fact that companies still have to execute.
In the case of Nader and Sirius XM, the more pressing question should be not about Malone's offer but about Sirius' execution as a standalone company. Where is the next leg of growth going to come from when auto sales reach a plateau? This is where I'm not sure management can deliver. To a certain extent, Nader has become blinded by his own interest.
With the stock now trading at 52 times earnings, these shares are expensive by every meaningful standard. Nader should realize that even though Malone is perceived as "low-balling" investors, the Street has been very generous all year. This is one of those case where he should just take his money and move on to the next great idea. Icahn is already there and waiting.
At the time of publication, the author was long AAPL.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.