Sirius XM hit the wires today with several bits of news that sent the stock upward yet again. The company reported over 300,000 new subscribers, S&P upgraded the company, and it was announced that SIRI would be refinancing some 2013 debt out until 2018.
Lost amongst all of this news is a little piece of information that would require investors to read between the lines. Normally this could be a dangerous activity because it relies on assumptions rather than fact. However, the assumption I am making is grounded in reality.
When Howard Stern signed his original deal with Sirius it was a material event that required an SEC filing. When Stern got his first bonus it was also a material event. The same held true for his second bonus. In point of fact, pretty much anything related to a Stern deal has required disclosure from the company.
With the debt refinancing the company had to disclose material events such as several Attorney’s General taking action against the company, and other happenings. The status of Stern is material enough that not only would it require SEC filings, but anyone considering buying the debt would want to know as well. If Stern had already signed, it would need to be disclosed. If Stern had rejected any deal and was not going to sign it would also be a material event that a potential debt holder would want to know, thus it would be disclosed.
The likely situation is that the Stern deal was a big subject as Sirius XM considered making this refinancing move. If I was considering buying SIRI debt, I would want to know the status of the deal. The fact that the company is able to, and will be successful in refinancing this debt could offer a clue that the status of the Stern deal is on a positive course. While clearly a deal is not yet complete, there has to be enough confidence in how SIRI is handling the deal that those buying the debt are comfortable in doing so.
Sirius XM’s Mel Karmazin has stated that he would like to get the deal done and announced prior to the Q3 call. That call should be happening within the next three weeks. For investors this could be huge news. It would be one of the events that I stated earlier in the month that would allow the equity to continue upward momentum.
Sirius XM seems to be hitting on all cylinders right now, and there is clearly a path that should have the company continuing to move forward on great metrics and positive news. Over the next three weeks we can anticipate a Stern announcement, October auto sales, and Q3 numbers that will demonstrate beyond a shadow of a doubt that the company is moving in all of the right directions from a financial standpoint.
Some may be looking for a pullback, but in my opinion that wont happen right now. There is are to many positives on the table right now.
Position – Long Sirius XM Radio