- Pandora Media (NYSE:P) is up 2.8% after FBN Securities' Robert Routh sees greater potential for a previously discussed Sirius XM (SIRI +0.3%) buyout, thanks in part to the Oracle of Omaha.
- Berkshire Hathaway's 13F showed Warren Buffett's firm took a position in Sirius XM, 67% owned by Liberty through its Liberty Sirius XM Group (LSXMA +0.5%).
- The fact that Buffett is invested in both Liberty Sirius and Sirius XM shows he's leveraged to Sirius XM's upside, says Routh, and "Although some may not read into this, we do ... as Buffett and his team at BRK must see material upside in SIRI equity from Q4 2016 levels (and in LSXM as well) or they would have not taken the new position but conversely would have divested their sizeable position in LSXM.”
- Speculation about a Sirius XM/Pandora combination fired up last year as Liberty's Greg Maffei floated the idea of buying into streaming music via Pandora, and the latter's shares spiked again in the late fall as merger chatter increased again.
- Marking SIRI equity to market, Routh figures Liberty Sirius is trading at a discount to per-share NAV, and therefore "LSXM could look to buy Pandora using its equity as deal currency IF Pandora’s Board would agree to value LSXM at its fair value in any such deal of $48.59 rather than at its market value." It's a deal Pandora shareholders should take, at least in theory, he says.
- And then "having all of SIRI (LSXM and SIRI) and P in the same place in an asset backed security would also justify a much higher public market valuation multiple than that presently ascribed to SIRI or P."