NEW YORK (TheStreet) -- Two separate law firms have announced investigations into Liberty Media Corp.'s (LMCA) proposed acquisition of Sirius XM Holdings Inc. (SIRI).
The law office of Brodsky & Smith, LLC announced Wednesday that it would investigate potential claims against Sirius XM's Board of Directors connected to the proposed Liberty acquisition. Former U.S. Securities and Exchange Commission attorney William Briscoe and the securities litigation firm of Powers Taylor LLP are also carrying out a similar investigation.
"The investigation concerns possible breaches of fiduciary duty and other violations of state law by the Board of Directors of Sirius XM for not acting in the Company's shareholders' best interests in connection with the sale process," according to Brodsky & Smith's announcement. "The transaction may undervalue the Company and will result in a loss or no gain for many Sirius XM shareholders. Sirius XM stock traded above the sale price at $4.13 per share as recently as October 22, 2013 and an analyst has set a $5.80 per share price target on Sirius XM stock."
The terms of the transaction, valued at $10.6 billion, dictate that Sirius XM shareholders would receive only 0.0760 shares of Liberty Series C common stock for each share of Sirius XM stock they own. The transaction values Sirius XM at approximately $3.68 per share.
Sirius XM's stock dipped 1% to $3.82 a share in midday trading on Wednesday with a volume of 73 million (compared to its average volume of 59.77 million), while Liberty's stock dropped 1.3% to $140.79 a share.
TheStreet Ratings team rates SIRIUS XM HOLDINGS INC as a Buy with a ratings score of B. The team has this to say about its recommendation:
"We rate SIRIUS XM HOLDINGS INC (SIRI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 2.2%. Since the same quarter one year prior, revenues rose by 10.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has increased to $302.24 million or 37.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.83%.
- The gross profit margin for SIRIUS XM HOLDINGS INC is rather high; currently it is at 65.01%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.54% trails the industry average.
- SIRIUS XM HOLDINGS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SIRIUS XM HOLDINGS INC increased its bottom line by earning $0.53 versus $0.07 in the prior year. For the next year, the market is expecting a contraction of 86.8% in earnings ($0.07 versus $0.53).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: SIRI Ratings Report