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Liberty Media Corp 8-K Report, Material Agreement (Jul 30, 2021)

Filed July 30, 2021For Securities:FWONKFWONAFWONB

Summary

Liberty Media Corporation (FWONK) announced on July 30, 2021, a material definitive agreement, specifically an Exchange Agreement, entered into on July 28, 2021, with its Chairman, John C. Malone. This agreement is designed to manage Mr. Malone's aggregate voting power in the company, capping it at 49% plus 0.5% under certain conditions. This arrangement is crucial given Liberty Media's ongoing stock repurchase program, which could otherwise increase Mr. Malone's voting power above 50% and potentially lead to single-stockholder control. The Exchange Agreement allows for the exchange of Series B shares for Series C shares (and vice-versa) of the various Liberty Media tracking stocks (SiriusXM, Braves, and Formula One) under specific circumstances. These include 'Accretive Events' (which would increase Mr. Malone's voting power above the cap) and 'Dilutive Events' (which would decrease it below a certain threshold). The agreement aims to maintain flexibility for the company's repurchase programs and other corporate actions while ensuring Mr. Malone's voting power remains within the agreed-upon limits, thus preserving a structure that avoids single-stockholder control.

Key Highlights

  • 1Entry into an Exchange Agreement with Chairman John C. Malone to cap his aggregate voting power at 49% + 0.5%.
  • 2Agreement addresses potential increase in Mr. Malone's voting power due to ongoing stock repurchase programs.
  • 3Mechanism involves exchanges between Series B and Series C shares across Liberty Media's tracking stock groups (SiriusXM, Braves, Formula One).
  • 4'Accretive Events' trigger exchanges to reduce Mr. Malone's voting power if it exceeds the target cap.
  • 5'Dilutive Events' allow exchanges to increase Mr. Malone's voting power if it falls below a certain threshold.
  • 6Company's Board believes avoiding single-stockholder control above 50% is in the best interest of stockholders.
  • 7Transactions under the agreement will utilize exemptions from Securities Act registration, relying on Section 4(a)(2).

Frequently Asked Questions

The primary purpose of the Exchange Agreement is to manage and cap John C. Malone's aggregate voting power in Liberty Media at 49% plus 0.5% under specified conditions. This prevents his voting power from exceeding 50% due to company stock repurchases or other corporate actions, thereby avoiding single-stockholder control and maintaining flexibility for the company.

The agreement establishes an exchange mechanism between Series B and Series C shares across Liberty Media's tracking stocks. If an 'Accretive Event' occurs (increasing Mr. Malone's voting power beyond the cap), he must exchange Series B shares for Series C shares. Conversely, if a 'Dilutive Event' occurs (decreasing his voting power below a floor), he may exchange Series C shares for Series B shares to bring his voting power closer to the target, without exceeding it.

The Exchange Agreement is directly linked to the company's stock repurchase program. Without this agreement, ongoing repurchases of Series A shares could have increased Mr. Malone's voting power above 50%. The agreement ensures that such repurchases can continue while preventing Mr. Malone's voting power from exceeding the agreed-upon limits, thus allowing the company to repurchase shares without triggering majority control by a single shareholder.

No, the shares of Series B and Series C common stock exchanged under this agreement will not be registered under the Securities Act of 1933. Liberty Media is relying on an exemption from registration under Section 4(a)(2) of the Securities Act for these transactions, which are typically available for private placements.