Investor News

It looks as if another step has been taken in what has been a long process for shareholder Michael Hartlieb. Mr. Hartlieb has formed an organization called “Save Sirius”, and has now filed a suit in U.S. District Court in Los Angeles. The suit accuses management of violating the federal Racketeering-Influenced and Corrupt Organizations act, breach of fiduciary duty, and violation of the Sherman Act.

Mr. Hartlieb has been vocal on various situations with regard to Sirius, XM, and the merger for a few years now, and up until recently has been acting on his own with regard to his various concerns. Now, it appears that he has formed an organization of about 500 shareholders that have joined him in his efforts.

According to a press release issued today, which this publication had no prior knowledge of, the current effort is to stop a potential vote at the Sirius XM annual meeting to be held December 18th, on increasing the fully diluted share count to 8 billion, as well on a vote regarding a potential reverse split.

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Barrington analyst Jame Goss has rated Sirius XM Radio as OUTPERFORM in a note issued October 30th. The analyst feels that, “the satellite radio concept is viable and valuable, particularly as changes are made in the context of a single corporate survivor. Our bias on this stock remains positive.”

Goss does note that financial issues have generated increased scrutiny on the equity, but recognizes that the company has exchanged some February debt for common shares, and feels that this could be an indicator that Sirius XM it is close to managing the immediate February 2009 maturities.

On the May and December XM debt Goss stated, “The second issue is $350 million of XM bank debt that comes due in May. Management feels these maturities can be extended. The other $400 million of maturities are more than a year away in December of 2009. This 1.75% convertible issue can potentially be replaced with 10% fixed rate debt.”

Confirming discussion on potential delisting and rule changes, Goss stated, “The NASDAQ has temporarily waived the $1 per share trading requirement due to the financial crisis, and SIRI’s sizable market cap appears to place it in a separate category given its roughly 3 billion share base. While reverse splits are not typically a desirable option, this might be one of the rare exceptions to that rule.”

Barrington seems to bullish on the concept of SDARS without going overboard. The closing note in their report sums things up pretty well:

“Armed with improving visibility along these lines, we are reducing our target values to a new progression beginning with $0.60 based on 2009 assumptions and $2.00 based on 2010. The debate appears to have come down to an issue of survival of the company and the industry concept.”

Position - Long SIRI

Stifel analyst Kit Springs issued a report today in which he lowered estimates in the subscriber and revenue category, but maintained a BUY rating with a price target of $1.25. Springs notes several factors in his report, but mostly ties the lowered guidance to weak auto sales. According to Spring car sales will come in at 13.5 million for the year rather than 13.8 million.

Among items that could be perceived as positive was the NPD retail sales which were not down as far as Springs anticipated. While September sales were down 7%, and quarter sales were down 10% it was a better number than the 25% down that the analyst was anticipating.

The Stifel buy rating with a target price to $1.25 is based on a 5 year DCF with 11.4% WACC and 7.6x terminal EBITDA multiple. Spring states, “100% downside seems like an increasingly likely scenario. That said, we see several multiples of upside possible should SIRI refinance successfully, potentially realistic should churn remain solid.”

Springs Notes The Following:

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Delisting has been a bit of a hot topic in the satellite radio sector. For Sirius XM, that concern was alleviated because of a rule change by NASDAQ that placed delisting for companies trading under $1 on hold until January 16th of next year.

WordSpace is under $1, but that is not the driver of their potential delisting. Instead, the issue focuses on the fact that WorldSpace has filed for bankruptcy protection, and that the total assets and revenue of the company is below the $50 million dollar level.

NASDAQ has given WorldSpace until November 20th to become compliant. Odds of that happening are quite slim, and thus it would appear that the equity is headed for the pink sheets. Investors in WordSpace should exercise caution going forward, as the equity is becoming thinly traded, and there is a potential delisting about to happen.

Position - Long SIRI, No Position WRSP

It seems that whenever something good starts to happen for Sirius XM Radio, that Goldman Sach’s analyst Mark Wienkes is there to cast doubt on the situation, and in essence, hobble the equity. After trading well yesterday, Wienkes took yet another shot at Sirius XM, that at this point reminds of a classic movie scene from Misery.

For those that for some reason may not have seen the movie, the premise is that author Paul Sheldon (played by James Caan), is “rescued” from an accident by Annie who turns out to be a crazed fan (played by Kathy Bates). After bringing Sheldon back to health, Annie will not let him go, and stops at nothing to limit the progress of his health. Every time Sheldon appears to be gaining strength, Annie does something to break his will. At one point she even “hobbles” Sheldon by breaking his ankles in a manner that can only be described as gruesome. The video is not for the feint of heart, but then again, neither is the current stock price of Sirius XM Radio.

In his latest report, Wienkes moved his price target down to .25 cents, and lowered subscriber as well as revenue estimates for the company. Wienkes still sees the debt refinancing as a major issue.

Is Wienkes hobbling Sirius XM? For many it certainly seems to be the case. The timing of reports issued by the analyst has more than a few people wondering if there is some sort of agenda. Each investor will have to arrive at their own conclusion, but there is little doubt that the latest report issued by Wienkes has had an impact on the stock price.

Sirius XM stock has seen active trading today, and is posting impressive gains even as the Dow and other indicies are simply treading water. Whether the activity is shorts covering, or simply a technical bottom, longs invested in the stock are perhaps beginning to see a much needed boost in the stock price.

No, the price is not where people want it to be, but it is moving up, and seems to be doing so as if it was on a mission. Last week Karmazin appeared on Autoline and conducted an interview that lasted about half an hour. Many of Karmazin’s recent appearances have been well publicized and known about well in advance. People seemed to be waiting on every word, and if certain answers were not given, they were disappointed. Perhaps the appearance without the pre-announcement was part of what we needed.

Sirius XM should be conducting their Q3 2008 conference call within the next two weeks. this will be one of those times where everyone will begin to anticipate what will be said. In my opinion, the conference call will be a dissemination of the company performance, some very conservative guidance, and an overall stance that the company will be able to deal with the debt issue that awaits in 2009. The fact that the company has already started to deal with the February 2009 converts is an indication of movement on the issue.

So what exactly is behind the big gain for Sirius XM? At this point the answer is not known, but typically we will all find out soon enough. Depending on what is driving this action, we may have a good week in the satellite radio sector.

Position: Long SIRI

People invested in satellite radio have been looking for answers… any answers. They have had a strong desire to hear from the company, and want to know what the plans going forward are. In a perfect world, we would all have these answers, but in today’s environment, even good news simply seems to get washed up in a vortex of negativity.

In the midst of all of this, Mel Karmazin did an appearance on Autoline in which he discussed the current situation, and in particular focused on the OEM channel. The interview does not give all of the answers, but does provide some answers and insight that investors are seeking. The video is well worth watching, and at less than 30 minutes long, does not wipe out your schedule. Grab a cup of coffee and click and watch.

Thanks Muscle

Position: Long SIRI

The short positions for equities in NASDAQ have been published and once again, Sirius XM Radio is near the top of the list. From September 15th to October 15th, short interest increased roughly 33,000,000 shares and now stands at about 232,000,000. This places Sirius XM shy of only Level 3 in terms of overall short interest.

Sirius XM, which has a shareholder meeting in late December, and which has no yet announced a date for Q3 earnings has been a target for shorting for quite some time. Despite what appears to be heavy shorting, institutional ownership stands at 54% according to NASDAQ.

On Friday Sirius XM stock saw a mini rally, and appeared to have bounced off of the .25 cent mark. To technical traders this could represent a buy signal if certain criteria are met, but the behavior of the markets lately makes it very hard to determine if a bottom has happened.

Position - Long SIRI, No Position Level 3

If you are invested in the satellite radio sector, it is likely through Sirius XM radio rather than WorldSpace. For sector watchers, the recent happenings at WorldSpace do not bring about confidence, yet at this point there are likely more than a few people wondering if the problems at Worldspace are a precursor for Sirius XM.

Today, WorldSpace gained access to $2M in Interim Dip Financing and began their sale process.

WorldSpace has received the approval of the United States Bankruptcy Court in Delaware for the first part of an interim Debtor-in-Possession (DIP) financing in an amount up to $2M which will enable the company to meet payroll obligations to critical employees and commence a process to sell the Company or its assets.

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SiriusBuzz Radio will air with our usual show, and our usual time-slot tonight at 9:00 PM Eastern. This will represent the third radio show this week. On October 20th we aired SiriusBuzz Radio - Special Edition, and On October 21st we aired Tyler’s Take.

A lot has happened in the past week, and there is certainly a lot to cover and discuss. Opinions on satellite radio are coming in from all directions, and shareholder frustration is peaking. Callers are welcomed to join in by dialing 347-945-7995.

We will close some loops and take live questions concerning the radio shows early in the week, and share perspective on what is currently happening in satellite radio. With Sirius XM stock now close to twenty-five cents, one can only imagine what the course the show will take.

Position - Long SIRI