The stock market is tough enough to navigate without having to deal with roadblocks that have nothing to do with corporate execution of a business plan or normal supply-and-demand dynamics for equity securities.
We make an investment on reasonable assumptions and take the risk that such assumptions pan out. What we can't do is foresee events that are totally outside of the control of the company, economy, or ourselves. For example, if we buy a stock of a company that utilizes acquisitions as part of its strategy, we can safely assume from past examples that the government will approve or disapprove such acquisitions in a reasonable amount of time.
What happens if the government fails to live up to that expectation? In many cases it's no big deal, but in a confluence of bad events, a failure of this kind can destroy a company.
That is exactly what happened with Sirius XM Radio (NASDAQ: SIRI).
The government, heavily influenced by the lobby of terrestrial radio, delayed approval for a merger between Satellite Radio and XM Satellite Radio well beyond what a reasonable person would have expected. Even after accounting for complexity of issues regarding new technology and monopolistic implications of approval, the length of time to approve the merger was entirely too long.
The question I have is, was the government negligent in its duties to the financial markets with respect to approving or disapproving this deal?
The issues involved were actually quite simple. Ultimately the government needed to determine if this deal would harm consumers in the long run. With concessions from the companies and considering the natural competition from terrestrial radio, MP3 players, and the Internet posed, the government should have been able to answer this question quickly.
Instead, it dragged its heels, and in doing so SIRI's prospects for survival dwindled with each passing day. Even a decline of the deal would have been preferable to the purgatory state the company was forced to endure while waiting and waiting and waiting.
What a joke!
The government failed here, and shareholders of SIRI were harmed immensely. Now as we wait for the company to file for bankruptcy or sell for pennies on the dollar, one must wonder what recourse a shareholder has against the government for this egregious behavior.
Of course, there is no recourse. The government cannot be held liable for duties performed in its regulatory role. What a travesty.
The only way shareholders could sue the government and receive damages would be to prove that people at the Federal Trade Commission or Justice Department took bribes. Now I would not be surprised of such activity given some of the frauds we are seeing today, but there is no proof.
If you worked at the Justice Department or the FTC and suspect that members took bribes from the terrestrial lobby and have evidence to such bribes, please come forward. It is the only hope for shareholders that have a legitimate beef here.
In the absence of that we can chalk this one up to the government screwing the little guy.
So many SIRI shareholders are individuals that believed in the promise of satellite radio. What they did not believe in was a government that would intentionally harm their prospects by dragging out approval of the merger.
It is a truly sad story.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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Reader Comments (Page 1 of 1)
2-12-2009 @ 7:00PM
emax said...
Sorry, Regardless of anything going on here, Satellite radio simply does not have the appeal to generate enough listeners. And the merge did nothing but help XM or Sirius listeners get the other half's stations. Not entice me to join for the overpriced monthly fee.
Everyone I know who jumped on because it was sooooo coool has now dumped their subscription. They have all realized their money is better spent other places.
The failure was in how XM/Sirius executed its business model and price structure, anything else was just sprinkles on the cake.
2-12-2009 @ 7:34PM
sam said...
19 million people disagree. Including me.
They are one of the few subscription based companies that have grown even through this economic free-fall.
Everyone I know that has Sirius can't live without it. Sirius has content you won't find anywhere else.
2-12-2009 @ 7:41PM
RateNerd said...
So now do I have to pitch my XM boombox? Thanks for nothing! http://www.ratenerd.com
2-12-2009 @ 9:39PM
Chuck said...
The NAB proved that Satellite radio was a legitimate competitor by lobbying so hard ($4.3 million - orbitcast.com) against the merger.
This should have been enough to show that a merged Sirius/XM was not a monopoly.
2-12-2009 @ 10:47PM
Dave said...
Classic example of government interference in the marketplace.............I think a bail out is needed.
2-12-2009 @ 11:20PM
Mike said...
I feel that the argument made is more then valid but also feel that their are other circumstances invloved.
As a share holder who purchased @ $7.00 and $9.00 per I feel the pain.
As of late the goverments performance has been poor at best. With all the hub bub about spending in the private sector who has been watching the goverment spending? Remember the $900 hammer?
2-13-2009 @ 5:46AM
BHarrison said...
Congress and our federal agencies just seem to be "influenced" too much by the lobbyists. That is basically what led to Congress' actions in removing, "relaxing", and failure to provide regulations that would have TOTALLY PREVENTED the frauds of the "derivatives", etc. that eventually caused the economic melt down of our economy.
Our government agencies such as the FTC, the FDA, etc. have become too influenced by the special interests lobbyist groups; and we the people are suffering the results of all of this. Outrageously priced pharmaceuticals, etc. And now business venture failures due to bureaucratic foot dragging resulting in the failure of the Siris merger.
It seems that at the heart of all of this is a Congress composed of politicians who are vastly INEPT, INCOMPETENT, and/or just plain too CORRUPT to be running our government. Congress has simply failed to be able to effectively "govern for the best interests of the American people as a whole". Congress has sold out to the special interests and is incapable of effectively addressing the problems that have arisen due to Congress failure to address their fiduciary responsibilities.
The vast majority of the "hack politicians" in Congress need to be removed from political office. Congress nust be purged of the CORRUPT Congressmen/women.
2-13-2009 @ 9:41AM
Fortune628 said...
emax you have no idea what you are talking about. Every person I know who has XM/Sirius cant live without it. Since the the companys have come together the reception is even better in the worst situations. Its alot of bang for the buck.
2-13-2009 @ 3:47PM
OldGaDawg said...
AGREE !!!!! POLITICS AS USUAL.
2-14-2009 @ 1:13AM
Jessy Scholl said...
The first poster is right. Though the price structure was ok, both companies chose to create and build their own receiver independent of the other company. This meant that any receiver build by Sirius couldn't receive any XM programming and vice versa. This created a debt level where both couldn't manage their debt. Instead, a third party should have been hired to produce the receivers. Sony and someone else would have been glad to assist either company in this case. While both receivers would have been incompatible with each other, it would have touched off a format war that would have eventually lead to a winner while satellite radio companies flourished.
As for that price structure, I don't think it would have been a problem, but would you want to pay $359.99 per year for tons of music channels when you just listen to one, or pay one time, through i-tunes for the songs you want. Also, would you like to pay through the nose for all that Sirius offered prior to merger just to listen to Howard Stern?
Clearly the market has spoken and it was clear that it rejected the Sirius/XM business model. When they announced their merger, I said to myself that they might as well just reject it because it was clear that both companies were merging debt and systems. All that needed to happen was that both companies needed to go out of business, Let the courts pick up the pieces, and let somebody else do satellite radio under a different format. The only thing that Uncle Sam can take blame for is listening to Jim Cramer who supported the merger.
2-28-2009 @ 11:57PM
dave said...
I live in a place where there is no radio to speak of. Northern Vancouver Island,Canada. I have two subscriptions and don't mind the cost, I love my sat. radio and would miss it dearly, if it were to go under.