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an independent committee has been appointed to oversee the process through which additional shares may be issued to Apollo

In the world of finance, it seems a lot of so-called "independent committees" don't turn out to be as independent as one thought. Statements such as that I'd take with a huge grain of salt. Where were the board of directors that were supposed to be protecting shareholders for companies like Enron, WorldCom, Tyco, and plenty of other examples?

If the company was valued at only its $300 million book value for example, i.e., 3 times the current stock price, I would come out ahead if the company received cash of $600 million, but my percentage interest in that extra cash of $600 million plus the company's existing book value of $300 million was now only 33%.

This seems absolutely absurd. Not even getting into the problems of how accurate is "book value", who in their right mind would pay to profit YOU. Not that you aren't deserving of it, of course, but nobody makes an investment with the intention of having everyone else profit from it.

I'm having a hard time understanding exactly what's going through your mind, but if someone wants to acquire more shares, they're NOT going to buy them at three times the current stock price. They'll just buy the shares off the open market. If the company is desperate for money, that gives anyone with $600 million major negotiating power, and he'd likely be able to get the extra shares for less than the current market price. If that $600 million is the difference between share dilution and bankruptcy, the company will gladly offer the shares at below the existing share price.

And is this $600 million just a share-for-cash swap? If that $600 million shows up as debt on the financial statements, your stake in the money comes out to be ZERO. None of it really belongs to the company, it belongs to the person who provided the debt.

The only way you'd come out ahead in any of these situations is in the sense that if Sirius finally results in self-sustaining profits, your shares won't become completely worthless instead of just nearly worthless.

But back to that whole "book value" thing you mentioned: Book value has a nasty habit of not being very accurate. It's even worse when companies are losing money hand-over-fist in which case (theoretically, at least), book value will steadily decrease. If it's worth $900 million today, it might be half that in a couple of years. Don't think the company can't be worth less than $900 million just because that's the book value. Especially when the company is losing as much as Sirius. What was the book value of Enron before they declared bankruptcy? I bet it wasn't zero.

-- Ryan
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