Why is Liberty Media Buying Sirius XM Shares?

The major distributor of TV entertainment Liberty Media Corporation (NASDAQ:LMCA) could soon gain a majority stake in Sirius XM (NASDAQ:SIRI) as the company continues to buy up Sirius shares. While this comes as no surprise to Sirius XM, it is good news for investors.

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As of May 8, Liberty had acquired approximately 45.2 percent of Sirius stock. Wedge Partners analysts expect the entertainment company to gain a 51 percent controlling stake in the company near-term. The firm asserts that if Liberty gains control of Sirius, the company would be allowed to effectively pick a new Chief Executive Officer. The option would be contingent on whether Sirius’s current CEO Mel Karmazin chooses to leave after his current contract expires on December 31. Over the past eight years, Karmazin has brought the radio company to its current profitable standing, but he has implied in previous statements that he might soon be leaving the company.

Sirius certainly has the potential to take over the radio industry. Internet radio provides better service and reach than traditional and satellite radio. Liberty Media is making a move in the right direction with its investment in Sirius XM, and its motives could be to move Sirius from satellite radio into IP-delivered radio. Simply put, Liberty Media’s majority stake in Sirius XM could drive up shares of both companies and help Sirius XM come out on top in the Internet radio industry, where it could compete with services like Pandora (NYSE:P) and Spotify.

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