Summary
I discuss why Pandora shareholders might be getting lowballed.
Market now believes the deal will go through as proposed by SiriusXM.
Opportunity to purchase a free call option during P's "go-shop" period.
This shouldn’t come as a surprise considering we’re dealing with Liberty (LSXMA), but I seriously think Pandora (P) shareholders are getting lowballed with the latest SiriusXM (SIRI) offer. The latest offer involves an all-stock deal with a 1.44 exchange ratio i.e. each share of Pandora will be exchanged for 1.44 shares of SiriusXM. Per Sirius, this works out to an ~13.8% premium based on 30-day VWAP.
There isn’t much contention that SIRI paper is richly valued. The fact that management has hit the brakes on buybacks isn’t a coincidence – my guess is management thinks the stock is very rich as well. With that in mind, the all-stock deal shouldn’t really come as a surprise – SIRI is shrewdly trading richly valued paper for "cheap" paper.
