Malone currently has a 40 percent stake in Sirius, but the request fueled speculation that the billionaire is looking to increase his stake in Sirius and spin it off. The FCC deemed the application unacceptable because Liberty Media could not get passwords and other information from Sirius.
In 2009, Malone saved Sirius from bankruptcy with a $530 million loan. As a result, Liberty own preferred stock convertible into approximately 40 percent of Sirius's common share. The request to the FCC caused tension between Sirius Chief Executive Officer Mel Karmazin and Liberty - the satellite radio company's biggest shareholder.
According to an analysts, Liberty would have to buy shares or pursue other means to gain more control of Sirius after this filing. The FCC's rejection is considered positive for Sirius because its value will increase as Liberty purchases more shares. Meanwhile, control of Sirius's licenses to use public airwaves could help Malone gain leverage for favorable terms if he were to end the alliance with Karmazin.
The FCC announced that Liberty did not establish whether it intends to convert stock or intall a board majority. The document was signed by deputy chief of the FCC's international bureau and chief engineer of the office of engineering and technology. Both Liberty and Sirius have not commented on the matter.
Sirius fell 2.3 percent to $2.16 at 4 p.m. Friday on the Nasdaq Stock Market.
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