Don’t Believe Everything You Read
It all started with a remark or two from Mel Karmazin at the recent Merrill Lynch media conference. I wrote that day exactly what it was Mel had done wrong, in this meeting of media moguls, and Mel was nice enough to apologize for his flippant remarks in an interview 1 week later with the Wall Street Journal.
As I troll through the barrage of news stories relating to satellite radio, it has dawned on me that perhaps the most damaging comment from Mel has not been addressed. He said that “regular radio sucks” as an investment. The problem with this statement is that regular radio is owned primarily by NAB controlled, traditional media companies. The recent negative bias seems to be nothing less than a smear campaign designed to destroy confidence in Sirius XM.
And it’s working. Even the strongest supporters of Satellite Radio seem stuck on this issue of debt due next year, and their confidence in the product and company is being destroyed. They have created a fear and doubt scenario that has become the focus of Sirius XM. New products and programming, analyst buy ratings and reaffirmations, and great new pricing options are doing little to affect this negative sentiment.
Every article I read these days mentions at the very least, the 300 million dollars in debt that Sirius XM has coming due in February 2009. Not one of them mentions the plan laid out by Mel & Co. to deal with the issue. Everyone looks at Lehman and makes the assumption that liquidity problems in the investment banking sector are a negative for Sirius. Nothing could be further from the truth.
The reason I propose this is that Sirius has made it clear that they first intend to use cash on hand to dispose of the convertible debt obligation. Assuming Sirius was to use 150 million dollars, that would only leave 150 million to dispose of. The company has offered that any shortfall’s would be made up of bank loans. There are other options as well. Lines of credit from the oem’s and Loral for example. My personal opinion is that more than enough cash will be available when these debt obligations are due.
It seems no one is willing to give the company time to execute on its business plan. A la carte offerings, “best of” programming and even the new navigation systems offer increased incremental income and should greatly improve the company’s liquidity and top line growth well before next February. If I can figure this out, why can’t Wall Street?
The answer, I’m afraid, is in the negative media bias campaign. It looks to me like the NAB is not quite done with their mission to diminish competition, by removing the greatest threat to terrestrial radio’s stranglehold on the American public; Satellite Radio!
Position: Long SIRI, no position LORL
With all due respect dude…to say that Mel’s comment of “Traditional Radio Sucks” spurred the NAB to retaliate like some hurt child is kinda stretching it.
Personally I agree with Mel. It DOES suck. But wether he said that or NOT makes not ONE lick of difference to the NAB. They would have…and will CONTINUE to do ANYTHING they can to undermine confidence in SiriusXM.
I mean SERIOUSLY…They are Sat Radios main competition! – and they are hurting and scared of the future!
Words like “SUCK” are Mel’s speaking style. You make it sound like Mel woke up a “sleeping giant” with that word…when in reality, that Giant has been on the attack since before the merger was even announced and will continue to do whatever they can to undermine confidence.
Secondly…to say that what happened to Lehman and Merrill…and the credit crisis ISN’T having an effect…at least on a psychological level is silly. Of COURSE it is. SOME of the best stocks with ZERO debt are WAY WAY down because of this.
I agree with you that the negative bias towards Sirius has been out of balance. And that Sirius HAS many other options that aren’t being focused on.
If Sirius can weather this storm…which I believe they can…these options WILL become evident, and the balance will be restored. But it’s going to be a rocky road.
I’m also surprised you and hardly ANYONE is mentioning the huge impact of naked shorting is having not only on Sirius but the entire market. It’s playing such a HUGE part on the negativity out there…and it BLOWS my mind that the tv pundits aren’t pounding the table about it.
Anyway, Mel is Mel. I LIKE that Mel…and although people are pouncing on EVERY word he says now…I don’t want that Mel to go away. Once he gets the refinancing done(like you and I believe he will)….mark my words…people will LOVE to hear Mel say things like REGULAR RADIO SUCKS. They’ll suddenly call Mel a genius and praise him for his cocky confidence.
FUCK the NAB. They’re going to do what they are going to do REGARDLESS. I don’t want to see Mel change for anyone…ESPECIALLY the NAB. 🙂
I mean, doesn’t every investor remember the 18 month FCC merger delay and how FRUSTRATING it was that Mel COULDN’T SPEAK HIS MIND? People were complaining that Mel seemed passive and spineless. And NOW finally when the merger is done…and Mel says REGULAR RADIO SUCKS….instead of CHEERING….people are complaining again.
you can’t win. I say GIVE EM HELL MEL.
Friggin…
If I said that you sucked, what would you do? You would attack me in return.
The point I was trying to make is that the media is attacking Sirius.
I hear you Brandon. And I’m not attacking you. I understand in essence what you’re saying.
I’m just trying to look beyond that to see the larger picture.
And my point was…do you HONESTLY think that the NAB’s campaign against Sirius EVER stopped? And that when they heard Mel say “REGULAR RADIO SUCKS”….they SUDDENLY thought…OH YEAH??? ….and then restarted their campaign against Sirius in retaliation?
I’m sorry. I don’t believe that for one second. I really don’t.
If you said I sucked, yeah, I might ask why? But I am not hell bent on DESTROYING YOU. If I was…if that was my MISSION in life…then it wouldn’t matter…because my whole purpose would be to destroy you.
Just making a point.
Alot of people are still upset about how Mel closed the merger. I’m past that. I like the feisty Mel. Don’t get me wrong, I want to SEE action by Mel…and not just talk. But once the refinancing is done, and people breathe a sigh of relief…I think they’ll be alot more tolerant of Mel’s blunt style of talking. In fact i really think they’ll ENJOY it.
I agree with frigginregan… no way was this spurred by a “flippant” Karmazin comment.
FWIW, you’re giving the impression that you were not invested in DARS back in 2002. If you were, then you do not remember the press from back then… what we are seeing is merely history repeating itself. Just ask Tyler, he was there then.
The media was relentless on both Sirius and XM, as they were attempting to refinance large amounts of debt (ironically, the last time this issue happened). Every article questioned their ability to do it; pointed out how much was due; and questioned the solvency and prospective growth of the industry.
This is not something new… and I dont believe that the NAB needs to lead the way in bashing them. The Street does a good enough job of it on their own. It’s going to continue until their is a definative announcement of what they’re doing — not just plans — but official announcement that something was done. THEN they still have to prove the synergies and business model. This is going to go on for much longer — regardless of what the NAB says or does.
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Again Brandon…you are so right. I am just as sick as you are of the media attacks on Sirius. I have to roll my eyes everytime I see fear mongering headlines like “CAN SIRIUS GO TO ZERO?” or “3 REASONS SIRIUS WILL FAIL”
They are so biased it’s a joke. But they sell. They feed that environment of fear thats running rampant thru the market. Unfortunately it’s how the media operates these days. FEAR FEAR FEAR.
But until Sirius can rise above the uncertainty and PROVE them wrong…the media will NEVER let up. They know FEAR sells.
The good news is that SEXY sells too. And once Sirius crosses that line into SEXY again…the tide will turn…and the Media stories will be “MEL CEO OF THE YEAR!” “SIRIUSLY HUGE PROFITS!”
As a long, it’s been rough. I have my good days and bad in how I deal with the never ending negativity. So I understand the frustration.
But underneath it all…I believe the tide will turn. And I don’t expect the media to jump on board with that view right away.
SEXY will prevail. Right now FEAR rules the day.
We just have to weather the storm and be patient.
LOL…having said that…I know I’ll have a bad day and lash out at Mel or the media about something during this transition period. Hey! I’m an investor.
It’s all good.
Keep up the great site Brandon. SiriusBuzz is such a sanctuary of intelligent discussion from the insanity of other places like the Sirius Yahoo MB. 🙂
On a positive note, Sirius is up 20% in Frankfurt. 🙂
My god, how many times does it need to be said it has only been a few weeks so far. Hell you can’t even say it has been a few months yet. I said it a long time ago that it was going to be a hard 2 quarters. We are not even half way there yet. Wait till they report 3rd quarter results it will be worse. We all know (people that have followed the metrics) that 3rd quarter always sucks for net sub adds, and this time we dont even get to look forward to the other good numbers that come out, because those will be eaten up by the merger cost and a bunch of new radios coming out. My point is if you let this crap get to you, you better hold on alot tighter because it is only going to get worse. Our only hope for a bright spot right now is that SIRIXM was able to cut enough soon enough that those savings will make up for the cost of the merger.
Did anyone see that Yahoo just added TWO Negative Business Week articles about Sirius FROM FRIGGIN JUNE to the “Headlines” section on the Sirius Yahoo page.
Talk about a negative media campaign! They’re trying to flood the net with negative news….even if they have to scrounge up 3 month old articles. Unbelievable.
The SEC Just announced that starting tomorrow NO MORE NAKED SHORTING!!! WOOO HOOO!!!!
FINALLY.
Hope this helps Sirius a bit. We could use any and all help at this point. 🙂
Naked short selling rules changed and take affect tomorrow.
If Sirius is on the list, does this mean they could get a bump on buy in ?
According to the “SHO” list…Sirius has been off the list since August 14th?
So I don’t know how much this will help Sirius…but at least it ensures that the shorts can’t get away with it in the future.
There is no list… it applies to all stocks that trade…
“Washington, D.C., Sept. 17, 2008 — The Securities and Exchange Commission today took several coordinated actions to strengthen investor protections against “naked” short selling. The Commission’s actions will apply to the securities of all public companies, including all companies in the financial sector. The actions are effective at 12:01 a.m. ET on Thursday, Sept. 18, 2008.”
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If no shares are available under $3.00 they could be hurting! I agree the NAB has just gone underground. They would do anything to kill SIRIUS XM. The short selling change should help. This market is feeding on rumor and greed. Value has little meaning. But in the long haul that should prevail. If a company can survive. The question of survival could affect SIRIUS XM sales.
Will these rules against naked shortening stop all the manipulation of the stock?
it’ll help o an extent, in that it will stop a practice that has given the shorts an unfair advantage…BUT…it wont change the bad credit market or the fear surrounding debt. so….the shorts will continue shorting thru the use of fear…..and until sirius can effectively remove the debt issue and show profit….the manipulation game will continue.
but again….this ruling is a good THING.
GS just hit $ 99.
Mel should downgrade them to a conviction sell and 6 month target of $ 9
It makes me feel a little better that they are getting taken to the slaughterhouse now.
Seems to me that several established commercial financial “news” websites bash the snot out of SIRI. I also see a lot of redundancy among sites regarding SIRI. Can’t so called news organizations handle real journalism? No! They cannot. This blog and a couple of similar ones seem to surface the most original thoughts and information about the stock–so this is where I turn during my lunch break. Brandon, Tyler keep up the great reporting. And I see Newman posted an article as well. CRFCEO over on Satwaves is doing likewise. Now, if the mainstream financial media would just pick up more on this and related blogs for input they need to generate more balanced reports. The outlook on SIRI would change for the positive, IMHO.
>The answer, I’m afraid, is in the negative media bias campaign. It looks to me like the NAB is not quite done with their mission to diminish competition, by removing the greatest threat to terrestrial radio’s stranglehold on the American public; Satellite Radio!<
If SIRI XM were to go BK. Nothing would change as far as competition with terrestrial radio. The music would not stop, the consumer would notice almost no changes.
The only thing a good BK does is allow your competition a new near/debt free lease on life. So in many cases. BK actually increases a companies ability to be competitive. Simply because they now operate without the heavy debt load.
A perfect example of this is Delta Airlines bankruptcy. The airline did not shut down operations. The planes continued to fly, pilots got paychecks, and customers reached their destinations. Delta emerged from Bankruptcy and then announced they were buying one of their competitors that hadn’t filed bankruptcy.
5 years ago SIRI basically effected an out of court Bankruptcy where the Secured Creditors walked away with a majority of the company. The music never stopped playing, just the common shareholders got largely wiped out. Shareholders of today benefit from the losses of previous shareholders that were largely wiped out in the re-fi.
KMart filed BK and then bought Sears.
While playing the NAB as the Evil Empire and villain so as to soothe battered egos, and pump up sagging shareholder loyalties. From a business point of view. Nothing could be further than the truth.
With few exceptions. Forcing your competition into Bankruptcy is a losing proposition.
And so it goes,
PCSTEL