Sirius XM considers a lawsuit filed by a group of shareholders baseless and plans to challenge it. The suit charges mismanagement.
EVP and General Counsel Patrick Reilly called the suit, filed by California real estate broker and Sirius shareholder Michael Hartleib, “the latest in a string of court filings by this plaintiff, all of which have been dismissed.”
Hartleib, who previously pursued a civil suit against the company, has filed a derivative suit on behalf of some 600 shareholders calling themselves “Save Sirius.” In the suit, the group accuses Sirius executives of racketeering and “unjustly enriching themselves at the expense of the corporation.”
He told me the suit seeks to prevent management from further damaging shareholders; in a recent SEC filing Sirius XM said it planned to seek shareholder approval to expand the share pool to 8 billion shares and then institute a possible 50-to-1 reverse stock split, something the Save Sirius group wants to prevent. “Ninety percent of the time the stock goes back down and does not hold the reverse split,” Hartleib said.
The group also seeks removal of CEO Mel Karmazin and board members.
I asked whether the downturn in the economy could have played a part in the satellite stock’s current pricing. Hartleib said, “All of this took place before the meltdown of the company. Karmazin has an obligation to do what’s in the best interest of his shareholders. He should have walked away from the deal,” referring to the harsh financing terms the satellite radio company agreed to get the merger deal completed.
Hartleib says the group is made up of people who have lost “millions” of dollars investing in mostly Sirius stock. Though he realizes tech investments are risky, he says group members want to be “made whole.”
Some group members plan to travel to New York for the first shareholder meeting since the merger, planned for Dec. 18, he said.