Correspondence 0001104659-24-036730 from Liberty Sirius XM Holdings Inc. (CIK 0002003397)
Liberty Sirius XM Holdings Inc. (CIK 0002003397)
Date: March 20, 2024 · CIK: 0002003397 · Accession: 0001104659-24-036730
AI Filing Summary & Sentiment
File numbers found in text: 001-35707, 333-276758
Letter
VIA EDGAR bchristensen@omm.com Division of Corporation Finance Office of Technology Liberty Media Corporation Preliminary Proxy Statement on Schedule 14A Filed January 29, 2024 File No. 001-35707
Dear Ms. Mansaray and Mr. Derby:
On behalf of our clients, Liberty Sirius XM Holdings Inc. (“New Sirius”) and Liberty Media Corporation (“Liberty Media”), we are providing their responses to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission set forth in your letter, dated February 20, 2024, with respect to the filings referenced above.
This letter and each of Amendment No. 1 to the Registration Statement on Form S-4 (as amended, the “Form S-4”) and an amended Preliminary Proxy Statement on Schedule 14A (as amended, the “Schedule 14A”) are being filed electronically via the EDGAR system today. The Form S-4 and Schedule 14A contain the preliminary proxy statement and notice of Liberty Media, prospectus of New Sirius, and notice and information statement of Sirius XM Holdings Inc. Capitalized terms used and not defined herein have the meanings given in the proxy statement/notice/prospectus/information statement.
For your convenience, we have restated below the Staff’s comments in bold, followed by our response to each such comment. Page references in our responses correspond to the pages in the proxy statement/notice/prospectus/information statement:
Austin • Century City • Dallas • Houston • Los Angeles • Newport Beach • New York • San Francisco • Silicon Valley • Washington, DC
Beijing • Brussels • Hong Kong • London • Seoul • Shanghai • Singapore • Tokyo
Registration Statement on Form S-4
Questions and Answers
What stockholder vote is required to approve each of the proposals?, page 16
1. We note your disclosure that the Company was informed that 50.3% of the aggregate voting power held by the executive officers and directors intend to vote “FOR” the transaction. Please revise to clarify whether the officers and directors entered into an agreement to vote their shares for the transaction and if they vote as they indicated, no additional votes will be required to be cast by existing shareholders, and the transaction will be approved regardless how public shareholders vote.
Response: In response to the Staff’s comment, we have revised the disclosure on pages 14, 17, 104, and 109 of the proxy statement/notice/prospectus/information statement.
Condensed Pro Forma Consolidated Financial Statements, page F-94
2. We note that the assets, liabilities, and operations of Liberty Sirius XM Holdings are greater than the remaining assets, liabilities and operations of Liberty Media following the split-off. Please provide a detailed analysis using the guidance in ASC 505-60-25-8 regarding your determination of the accounting spinnor and spinnee for the split-off.
Response: In response to the Staff’s comment, we have provided our analysis of ASC 505-60-25-8 in the following paragraphs, which concludes that the legal spinnor (Liberty Media) is the same as the accounting spinnor such that there is no reverse spinoff when accounting for the Split-Off.
In accordance with ASC 505-60-25-8, an entity is required to determine which party in a spinoff1 transaction is the accounting spinnor and which is the accounting spinnee in order to determine whether the spinoff transaction is accounted for as a reverse spinoff or not. The accounting guidance contains four criteria that an entity must consider when determining the required accounting and reporting in a spinoff transaction. A presumption shall exist that a spinoff be accounted for based on its legal form, in other words, that the legal spinnor is also the accounting spinnor. However, that presumption may be overcome based on an entity’s assessment of the four criteria and no one indicator shall be considered presumptive or determinative. The following discussion addresses the four criteria as detailed in ASC 505-60-25-8(a) through 25-8(d).
Criterion a: An entity should consider the size of the legal spinnor and legal spinnee based on a comparison of the assets, revenues, and earnings of the two entities noting that there are no established bright lines that shall be used to determine which entity is the larger of the two. Liberty Sirius XM Holdings’ historical results represent 72% of total assets of Liberty Media historical results as of September 30, 2023 and 74% of revenue and 50% of net earnings (loss) attributable to Liberty stockholders for the year-ended December 31, 2022. This criterion in isolation suggests that the legal spinnor is the accounting spinnee and result in a reverse spinoff, but a complete analysis of all the criteria must be considered.
1We note the Accounting Standards Codification Master Glossary includes definitions for both a spinoff and a split-off. Although there are legal differences between the two definitions, both are considered nonreciprocal transfers with owners and can be used interchangeably when discussing the accounting treatment.
Criterion b: An entity should consider the fair value of the legal spinnor and the legal spinnee. We determined the fair value of (a) Liberty Media pro forma ($17,394 million) using the number of outstanding shares of Formula One Group and Liberty Live Group multiplied by the respective closing share price as of September 30, 2023, and (b) Liberty Sirius XM Holdings ($8,316 million) using the number of outstanding shares multiplied by the respective closing share price as of September 30, 2023. This criterion in isolation suggests that the legal spinnor is the accounting spinnor and result in a regular spinoff whereby the legal form is followed for accounting purposes, but a complete analysis of all the criteria must be considered.
Criterion c: An entity should consider senior management and whether the legal spinnor or legal spinnee retains the senior management of the formerly combined entity. Senior management generally consists of the chairman of the board, chief executive officer, chief operating officer, chief financial officer, and those divisional heads reporting directly to them.
Current senior management of Liberty Media (the legal spinnor) consists of (a) Gregory Maffei, President and Chief Executive Officer, (b) Brian Wendling, Chief Accounting Officer and Principal Financial Officer, (c) Renee Wilm, Chief Legal Officer and Chief Administrative Officer, and (d) Ben Oren, Executive Vice President and Treasurer. The same senior management that currently exists at Liberty Media will remain at Liberty Media after the Split-Off and Merger. Immediately after the Split-Off and Merger, New Sirius (the legal spinnee) will be an independent company and Liberty Media will have no continuing stock ownership in New Sirius. As more fully discussed within the “Management of New Sirius Following the Merger” section of the proxy statement/notice/prospectus/information statement, New Sirius’ senior management after the Split-Off and Merger will consist of (a) Jennifer Witz, Chief Executive Officer, (b) Scott Greenstein, President, Chief Content Officer, (c) Thomas Barry, Executive Vice President and Chief Financial Offer, (d) Patrick Donnelly, Executive Vice President, General Counsel and Secretary, (e) Joseph Inzerillo, Chief Product and Technology Officer, and (f) Joseph Verbrugge, Chief Commercial Officer. The senior management of New Sirius will be the current senior management of Sirius XM Holdings.
As discussed in the preceding paragraph, the senior management of Liberty Media will remain at Liberty Media subsequent to the Split-Off and Merger while the current senior management of Sirius XM Holdings will become the new senior management of New Sirius. In considering that the legal spinnor (Liberty Media) retains the same senior management team before and after the Split-Off and Merger and that New Sirius will designate a new senior management that consists of the current senior management team of Sirius XM Holdings, this criterion in isolation suggests that the legal spinnor is the accounting spinnor and result in a regular spinoff whereby the legal form is followed for accounting purposes, but a complete analysis of all the criteria must be considered.
Criterion d: An entity should consider whether there is a proposed or approved plan of sale of one of the separate entities concurrent with the spinoff. This criterion is not applicable as there is no proposed or approved plan of sale of one of the separate entities concurrent with the Split-Off and Merger.
Overall evaluation of ASC 505-60-25-8: The guidance in ASC 505-60-25-8 states that a presumption shall exist that a spinoff be accounted for based on its legal form (legal spinnor and accounting spinnor are the same) unless the criteria in ASC 505-60-25-8(a) through 25-8(d) rebut that presumption. As discussed above, two of the three applicable criteria lead to the conclusion that the legal spinnor is also the accounting spinnor such that the Split-Off shall be accounted for based on its legal form. We do not believe the single criteria related to the size of the legal spinnor and legal spinnee (criterion a above) outweighs the other two criteria to rebut the presumption that the Split-Off be accounted for as a reverse spinoff. Additionally, we considered the example at ASC 505-60-55-7 through 55-9, which includes discussion with respect to what an entity’s shareholders and financial statement users would view as the most accurate depiction of the transaction. In substance, Liberty Media plans to split-off its subsidiary, Sirius XM Holdings, along with other assets and liabilities as more fully described in the “Description of Business of New Sirius” section of the proxy statement/notice/prospectus/information statement and continue to operate and manage Liberty Media with the same senior management and the remaining assets and liabilities as illustrated in the Condensed Pro Forma Consolidated Financial Statements resulting in the most accurate depiction of the Split-Off being represented by regular spinoff accounting (i.e. not a reverse spinoff).
3. Please revise to provide transaction accounting adjustments pursuant to Rule 11-02(a)(6)(i) of Regulation S-X, such as compensation expense for the accelerated vesting of stock incentives described on page 128 and any other items pursuant to Rule 11-01(a)(8), such as any additional debt and related interest and any other debt costs for debt transferred to New Sirius that was not previously included in Liberty Media’s Sirius XM Holdings operating segment.
Response: In response to the Staff’s comment, we note that the proxy statement/notice/prospectus/information statement reflects the financial condition and results of operations of Liberty Media pro forma for the divestiture of Liberty Sirius XM Holdings Inc. We considered whether pro forma financial information for New Sirius was necessary, but concluded the financial information in the Liberty Sirius XM Holdings Inc. combined financials statements are materially inclusive of all the financial information that an investor of New Sirius would need to make an investment decision. The unrecognized compensation expense, as disclosed, related to Liberty Awards was only $5 million at September 30, 2023 and the debt balance is not expected to change significantly at New Sirius following the transaction. As described in the Liberty Sirius XM Holdings Inc. combined financial statements, Sirius XM Holdings has put in place financing that will refinance a portion of the outstanding debt being contributed to New Sirius, but does not expect to add incremental debt.
4. We also note on page 129 that shares of New Sirius Common Stock underlying the New Sirius option awards may not be able to be registered on a Form S-8 and will be settled in cash upon exercise. Please provide disclosure of this term in the notes to the pro forma financial information. If cash settlement for shares underlying the awards is probable because the underlying shares are not registered, please provide a pro forma adjustment for the cash settlement. If cash settlement is not probable, please disclose an estimate of the cash required under this term if no shares underlying awards are registered.
Response: In response to the Staff’s comment, shares of New Sirius Common Stock underlying certain New Sirius option awards (that were previously Liberty SiriusXM option awards) may not be able to be registered on a Form S-8 and accordingly, we anticipate that following the Transactions, New Sirius will classify those options as liability awards versus equity awards. Prior to the Split-Off, Liberty Awards have been, and will continue to be, settleable in equity and will continue to be treated as equity awards. As of September 30, 2023, the intrinsic value of outstanding Liberty option awards was $2 million. Following the Split-Off, the liability will be recorded at fair value and adjusted each reporting period. Additionally, we expanded our disclosure to include a discussion of this possibility in the Liberty Sirius XM Holdings Inc. combined financial statements on page F-38.
5. We note on page 33 that the public shareholders share of ownership will increase from 17% prior to 19% after the spit-off and that the vesting of stock incentives will also be accelerated. Please provide an analysis of the impact of these terms on your evaluation of the accounting treatment afforded to the split-off under ASC 845-10-30-13.
Response: In response to the Staff’s comment, we have provided our analysis of ASC 845-10-30-13 in the following paragraphs, which concludes that the Split-Off is a pro-rata split-off accounted for at historical cost.
From an accounting perspective, it is important to consider the Transactions in their sequential order to determine the appropriate accounting treatment. First, the Split-Off occurs and second, the Merger occurs. The sequence is important because the Split-Off accounting dictates the accounting treatment for Liberty Media and the Merger accounting dictates the accounting for New Sirius given that the Merger only occurs once New Sirius is a separate independent company from Liberty Media with neither Liberty Media nor New Sirius having any ownership in the other. Additionally, we also considered the impact if the Split-Off and Merger were considered a single transaction.
Split-Off Accounting
The Accounting Standards Codification Master Glossary defines a split-off as a transaction in which a parent entity exchanges its stock in a subsidiary for parent entity stock held by its shareholders. The Split-Off as illustrated on page 32 reflects this definition as Liberty Media is exchanging common stock in its wholly owned subsidiary, New Sirius, for its currently outstanding Liberty SiriusXM Common Stock (i.e. common stock of the ultimate parent of New Sirius). In order to account for the Split-Off at historical cost as described in ASC 845-10-30-13, a split-off of a targeted stock (e.g. Liberty SiriusXM Common Stock) must be completed on a pro-rata basis to the holders of the related targeted stock and the creation of the targeted stock cannot be in contemplation of the subsequent split-off.
We considered and concluded that the Split-Off will be accomplished on a pro-rata basis in that ea
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filename1.htm
O’Melveny & Myers LLP
T: +1 415 984 8700
File Number: 0505809-00038
Two Embarcadero Center
F: +1 415 984 8701
28ᵗʰ Floor
omm.com
San Francisco, CA 94111-3823
March 20, 2024
C. Brophy Christensen
D: +1 415 984 8793
VIA EDGAR
bchristensen@omm.com
Ms. Mariam Mansaray
Mr. Matthew Derby
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Technology
Washington, D.C. 20549
Re: Liberty Sirius XM Holdings Inc.
Registration Statement on Form S-4
Filed January 29, 2024
File No. 333-276758
Liberty Media Corporation
Preliminary Proxy Statement on Schedule 14A
Filed January 29, 2024
File No. 001-35707
Dear Ms. Mansaray and Mr. Derby:
On behalf of our clients, Liberty Sirius XM Holdings
Inc. (“New Sirius”) and Liberty Media Corporation (“Liberty Media”), we are providing their responses
to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange
Commission set forth in your letter, dated February 20, 2024, with respect to the filings referenced above.
This letter and each of Amendment No. 1 to
the Registration Statement on Form S-4 (as amended, the “Form S-4”) and an amended Preliminary Proxy Statement
on Schedule 14A (as amended, the “Schedule 14A”) are being filed electronically via the EDGAR system today. The Form S-4
and Schedule 14A contain the preliminary proxy statement and notice of Liberty Media, prospectus of New Sirius, and notice and information
statement of Sirius XM Holdings Inc. Capitalized terms used and not defined herein have the meanings given in the proxy statement/notice/prospectus/information
statement.
For your convenience, we have restated below the
Staff’s comments in bold, followed by our response to each such comment. Page references in our responses correspond to the
pages in the proxy statement/notice/prospectus/information statement:
Austin • Century City • Dallas •
Houston • Los Angeles • Newport Beach • New York • San Francisco • Silicon Valley • Washington, DC
Beijing • Brussels • Hong Kong •
London • Seoul • Shanghai • Singapore • Tokyo
Registration Statement on Form S-4
Questions and Answers
What stockholder vote is required to approve each of the proposals?, page 16
1. We
note your disclosure that the Company was informed that 50.3% of the aggregate voting power held by the executive officers and directors
intend to vote “FOR” the transaction. Please revise to clarify whether the officers and directors entered into an agreement
to vote their shares for the transaction and if they vote as they indicated, no additional votes will be required to be cast by existing
shareholders, and the transaction will be approved regardless how public shareholders vote.
Response:
In response to the Staff’s comment, we have revised the disclosure on pages 14, 17, 104, and 109 of the proxy statement/notice/prospectus/information
statement.
Condensed Pro Forma Consolidated Financial Statements, page F-94
2. We
note that the assets, liabilities, and operations of Liberty Sirius XM Holdings are greater than the remaining assets, liabilities and
operations of Liberty Media following the split-off. Please provide a detailed analysis using the guidance in ASC 505-60-25-8 regarding
your determination of the accounting spinnor and spinnee for the split-off.
Response:
In response to the Staff’s comment, we have provided our analysis of ASC 505-60-25-8 in the following paragraphs, which concludes
that the legal spinnor (Liberty Media) is the same as the accounting spinnor such that there is no reverse spinoff when accounting for
the Split-Off.
In accordance with ASC 505-60-25-8, an entity
is required to determine which party in a spinoff1 transaction is the accounting spinnor and which is the accounting spinnee
in order to determine whether the spinoff transaction is accounted for as a reverse spinoff or not. The accounting guidance contains
four criteria that an entity must consider when determining the required accounting and reporting in a spinoff transaction. A presumption
shall exist that a spinoff be accounted for based on its legal form, in other words, that the legal spinnor is also the accounting spinnor.
However, that presumption may be overcome based on an entity’s assessment of the four criteria and no one indicator shall be considered
presumptive or determinative. The following discussion addresses the four criteria as detailed in ASC 505-60-25-8(a) through 25-8(d).
Criterion a:
An entity should consider the size of the legal spinnor and legal spinnee based on a comparison of the assets, revenues, and earnings
of the two entities noting that there are no established bright lines that shall be used to determine which entity is the larger of the
two. Liberty Sirius XM Holdings’ historical results represent 72% of total assets of Liberty Media historical results as of September 30,
2023 and 74% of revenue and 50% of net earnings (loss) attributable to Liberty stockholders for the year-ended December 31, 2022.
This criterion in isolation suggests that the legal spinnor is the accounting spinnee and result in a reverse spinoff, but a complete
analysis of all the criteria must be considered.
1We note the Accounting Standards Codification Master Glossary
includes definitions for both a spinoff and a split-off. Although there are legal differences between the two definitions, both are considered
nonreciprocal transfers with owners and can be used interchangeably when discussing the accounting treatment.
2
Criterion b:
An entity should consider the fair value of the legal spinnor and the legal spinnee. We determined the fair value of (a) Liberty
Media pro forma ($17,394 million) using the number of outstanding shares of Formula One Group and Liberty Live Group multiplied by the
respective closing share price as of September 30, 2023, and (b) Liberty Sirius XM Holdings ($8,316 million) using the number
of outstanding shares multiplied by the respective closing share price as of September 30, 2023. This criterion in isolation suggests
that the legal spinnor is the accounting spinnor and result in a regular spinoff whereby the legal form is followed for accounting purposes,
but a complete analysis of all the criteria must be considered.
Criterion c:
An entity should consider senior management and whether the legal spinnor or legal spinnee retains the senior management of the formerly
combined entity. Senior management generally consists of the chairman of the board, chief executive officer, chief operating officer,
chief financial officer, and those divisional heads reporting directly to them.
Current senior management of Liberty Media (the
legal spinnor) consists of (a) Gregory Maffei, President and Chief Executive Officer, (b) Brian Wendling, Chief Accounting
Officer and Principal Financial Officer, (c) Renee Wilm, Chief Legal Officer and Chief Administrative Officer, and (d) Ben
Oren, Executive Vice President and Treasurer. The same senior management that currently exists at Liberty Media will remain at Liberty
Media after the Split-Off and Merger. Immediately after the Split-Off and Merger, New Sirius (the legal spinnee) will be an independent
company and Liberty Media will have no continuing stock ownership in New Sirius. As more fully discussed within the “Management
of New Sirius Following the Merger” section of the proxy statement/notice/prospectus/information statement, New Sirius’ senior
management after the Split-Off and Merger will consist of (a) Jennifer Witz, Chief Executive Officer, (b) Scott Greenstein,
President, Chief Content Officer, (c) Thomas Barry, Executive Vice President and Chief Financial Offer, (d) Patrick Donnelly,
Executive Vice President, General Counsel and Secretary, (e) Joseph Inzerillo, Chief Product and Technology Officer, and (f) Joseph
Verbrugge, Chief Commercial Officer. The senior management of New Sirius will be the current senior management of Sirius XM Holdings.
As discussed in the preceding paragraph, the senior
management of Liberty Media will remain at Liberty Media subsequent to the Split-Off and Merger while the current senior management of
Sirius XM Holdings will become the new senior management of New Sirius. In considering that the legal spinnor (Liberty Media) retains
the same senior management team before and after the Split-Off and Merger and that New Sirius will designate a new senior management
that consists of the current senior management team of Sirius XM Holdings, this criterion in isolation suggests that the legal spinnor
is the accounting spinnor and result in a regular spinoff whereby the legal form is followed for accounting purposes, but a complete
analysis of all the criteria must be considered.
3
Criterion d:
An entity should consider whether there is a proposed or approved plan of sale of one of the separate entities concurrent with the spinoff.
This criterion is not applicable as there is no proposed or approved plan of sale of one of the separate entities concurrent with the
Split-Off and Merger.
Overall evaluation
of ASC 505-60-25-8: The guidance in ASC 505-60-25-8 states that a presumption shall exist that a spinoff be accounted for
based on its legal form (legal spinnor and accounting spinnor are the same) unless the criteria in ASC 505-60-25-8(a) through 25-8(d) rebut
that presumption. As discussed above, two of the three applicable criteria lead to the conclusion that the legal spinnor is also the
accounting spinnor such that the Split-Off shall be accounted for based on its legal form. We do not believe the single criteria related
to the size of the legal spinnor and legal spinnee (criterion a above) outweighs the other two criteria to rebut the presumption that
the Split-Off be accounted for as a reverse spinoff. Additionally, we considered the example at ASC 505-60-55-7 through 55-9, which includes
discussion with respect to what an entity’s shareholders and financial statement users would view as the most accurate depiction
of the transaction. In substance, Liberty Media plans to split-off its subsidiary, Sirius XM Holdings, along with other assets and liabilities
as more fully described in the “Description of Business of New Sirius” section of the proxy statement/notice/prospectus/information
statement and continue to operate and manage Liberty Media with the same senior management and the remaining assets and liabilities as
illustrated in the Condensed Pro Forma Consolidated Financial Statements resulting in the most accurate depiction of the Split-Off being
represented by regular spinoff accounting (i.e. not a reverse spinoff).
3. Please
revise to provide transaction accounting adjustments pursuant to Rule 11-02(a)(6)(i) of Regulation S-X, such as compensation
expense for the accelerated vesting of stock incentives described on page 128 and any other items pursuant to Rule 11-01(a)(8),
such as any additional debt and related interest and any other debt costs for debt transferred to New Sirius that was not previously
included in Liberty Media’s Sirius XM Holdings operating segment.
Response:
In response to the Staff’s comment, we note that the proxy statement/notice/prospectus/information statement reflects the financial
condition and results of operations of Liberty Media pro forma for the divestiture of Liberty Sirius XM Holdings Inc. We considered whether
pro forma financial information for New Sirius was necessary, but concluded the financial information in the Liberty Sirius XM Holdings
Inc. combined financials statements are materially inclusive of all the financial information that an investor of New Sirius would need
to make an investment decision. The unrecognized compensation expense, as disclosed, related to Liberty Awards was only $5 million at
September 30, 2023 and the debt balance is not expected to change significantly at New Sirius following the transaction. As described
in the Liberty Sirius XM Holdings Inc. combined financial statements, Sirius XM Holdings has put in place financing that will refinance
a portion of the outstanding debt being contributed to New Sirius, but does not expect to add incremental debt.
4. We
also note on page 129 that shares of New Sirius Common Stock underlying the New Sirius option awards may not be able to be registered
on a Form S-8 and will be settled in cash upon exercise. Please provide disclosure of this term in the notes to the pro forma financial
information. If cash settlement for shares underlying the awards is probable because the underlying shares are not registered, please
provide a pro forma adjustment for the cash settlement. If cash settlement is not probable, please disclose an estimate of the cash required
under this term if no shares underlying awards are registered.
4
Response:
In response to the Staff’s comment, shares of New Sirius Common Stock underlying certain New Sirius option awards (that were previously
Liberty SiriusXM option awards) may not be able to be registered on a Form S-8 and accordingly, we anticipate that following the
Transactions, New Sirius will classify those options as liability awards versus equity awards. Prior to the Split-Off, Liberty Awards
have been, and will continue to be, settleable in equity and will continue to be treated as equity awards. As of September 30, 2023,
the intrinsic value of outstanding Liberty option awards was $2 million. Following the Split-Off, the liability will be recorded at fair
value and adjusted each reporting period. Additionally, we expanded our disclosure to include a discussion of this possibility in the
Liberty Sirius XM Holdings Inc. combined financial statements on page F-38.
5. We
note on page 33 that the public shareholders share of ownership will increase from 17% prior to 19% after the spit-off and that
the vesting of stock incentives will also be accelerated. Please provide an analysis of the impact of these terms on your evaluation
of the accounting treatment afforded to the split-off under ASC 845-10-30-13.
Response:
In response to the Staff’s comment, we have provided our analysis of ASC 845-10-30-13 in the following paragraphs, which concludes
that the Split-Off is a pro-rata split-off accounted for at historical cost.
From an accounting perspective, it is important
to consider the Transactions in their sequential order to determine the appropriate accounting treatment. First, the Split-Off occurs
and second, the Merger occurs. The sequence is important because the Split-Off accounting dictates the accounting treatment for Liberty
Media and the Merger accounting dictates the accounting for New Sirius given that the Merger only occurs once New Sirius is a separate
independent company from Liberty Media with neither Liberty Media nor New Sirius having any ownership in the other. Additionally, we
also considered the impact if the Split-Off and Merger were considered a single transaction.
Split-Off Accounting
The Accounting Standards Codification Master Glossary
defines a split-off as a transaction in which a parent entity exchanges its stock in a subsidiary for parent entity stock held by its
shareholders. The Split-Off as illustrated on page 32 reflects this definition as Liberty Media is exchanging common stock in its
wholly owned subsidiary, New Sirius, for its currently outstanding Liberty SiriusXM Common Stock (i.e. common stock of the ultimate parent
of New Sirius). In order to account for the Split-Off at historical cost as described in ASC 845-10-30-13, a split-off of a targeted
stock (e.g. Liberty SiriusXM Common Stock) must be completed on a pro-rata basis to the holders of the related targeted stock and the
creation of the targeted stock cannot be in contemplation of the subsequent split-off.
We considered and concluded that the Split-Off
will be accomplished on a pro-rata basis in that ea