Orange County, Calif., realtor and stock investor Michael Hartleib has formed a group of more than 500 Sirius and XM shareholders who bill themselves as "Save Sirius" claiming the Sirius XM managers led by Mel Karmazin have unjustly enriched themselves at shareholders' expense.
Hartleib, who months ago warned that a merger between the two satcasters would spell only trouble for the companies' shareholders, is responsible for encouraging the group to file a derivative suit on behalf of shareholders in U.S. District Court in Los Angeles. It was ignited by Sirius XM's SEC filing two weeks ago in which the satcaster said it would ask for shareholder approval to dilute SIRI shares by expanding the outstanding share pool to 8 billion and then have a reverse stock split of up to one share for every 50 owned.
"We are working to gain control of our company by seeking to remove current members of the board as well as top executive Mel Karmazin," said Hartleib, speaking for Save Sirius and its members.
Hartleib invested more than $100,000 in shares of both Sirius and XM. Before the merger, he voiced great concern that, merged, the new company's share value would drop to the point where it would be almost worthless and easy for a large investor to swoop up and take the company private, robbing earlier investors of any possible equity and profit.
"It is clear that management under Mr. Karmazin's leadership has an agenda to steal this company from its shareholders," said Save Sirius in its press release announcing the suit. It accused Sirius XM of "locking their shareholders into the longest merger delay in history; preventing the corporation from seeking alternatives or potential suitors; failing to commercially introduce interoperable radios; insisting on going forward with the merger at any and all costs; and consummating the merger, issuing 300 million shares to the financiers of XM's debt to be sold short on the open market."
The investor group said Karmazin and the board "have severely damaged shareholder value in violation of their fiduciary duties. Shareholders have lost over 90 percent of their value under Mr. Karmazin's leadership."
Added Hartleib, "In light of the aforementioned, it is clear that they have lost sight of their obligations to shareholders and have breached and will continue to breach their fiduciary duties in the future. We, as a group, will not stand for this and will use any means possible to prevent and preclude them from stealing this company from its rightful owners -- we the shareholders."
Sirius XM did not immediately respond to calls for comment.