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Sirius XM Faces Lawsuit, Struggles amidst Falling Auto Sales

A group of shareholders of the formerly independent Sirius Satellite Radio are saying that top executives purposely worked to erode the value of the company in order to take the company private at a discount.

Led by Michael Hartlieb, the shareholders - part of a 500-strong group called Save Sirius - have sued Sirius XM Satellite Radio for sabotaging stock values and violating the Racketeer Influenced and Corrupt Organizations (RICO) Act.

The lawsuit, which was originally filed last July but was amended last week, states (via Beta News): “On or about June 29,2008… Sirius Satellite Radio Inc. acquired XM Satellite Radio Holdings, Inc. in a stock swap. Prior to closing, the merger was described as a ‘merger of equals’ by management. However, as a result of the merger, Sirius Satellite Radio Inc. took on approximately $620 million in debt from XM Satellite Radio Holdings, Inc. The individual Board of Directors… and officers of Sirius… refinanced the debt on such bad terms that the merger severely damaged the value of Sirius.”

Merrill Lynch analyst Jessica Reif Cohen issued a report yesterday (Monday) noting that falling auto sales for 2008 and into 2009 are troubling for satellite radio, as the OEM channel has been a key part of satellite radio growth.

Between slipping sales, a lousy credit market and a mountain of debt, analysts on Wall Street see real challenges for the newly merged company, writes Seeking Alpha.