The Faber Interview

Very good interview.

The full transcript is here:

http://www.cnbc.com/id/25978164/site/14081545/page/3/

I find it odd that the reverse split was the major talking point from the interview. Look at it in context. To me, it looks like he is saying that a reverse split is highly unlikely.

Quote:

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Faber: IT'S A VERY LOW PRICE. FORGET MARKET CAP. ARE YOU GOING TO DO A REVERSE SPLIT? IT'S EMBARRASSING TO LOOK AT SOMETHING WITH A ONE IN FRONT OF IT.

Karmazin: WELL, IT'S EMBARRASSING, AND I HOPE WE WON'T HAVE TO LOOK AT SOMETHING WITH A ONE IN FRONT OF IT FOR A LONG PERIOD OF TIME.

Faber: COULD YOU CONSIDER A REVERSE SPLIT JUST TO GET THE STOCK PRICE UP THERE? SOME PEOPLE CAN'T EVEN BUY THAT KIND OF A STOCK.

Karmazin: YOU KNOW, WE CAN CONSIDER ANYTHING, BUT THERE'S NOBODY THAT I FOUND THAT THEY REALLY CAN'T BUY IT. IF SOMEBODY REALLY WANTS TO OWN THIS STOCK and they WANT TO HAVE A GROWTH, THEY CAN BUY IT AT THIS PRICE. IT'S MECHANICS. IT'S A SPLIT, AND I JUST THINK THAT WALL STREET'S SMART ENOUGH TO KNOW WHAT THE VALUE IS.

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I'd seen in print and heard that big fund managers could not buy stocks priced under 10 dollars. Apparently, this is a myth. Mel said that anyone (implying institutions) can buy SIRI if they want it. Institutions have snapped up 92 percent of SIRI by some means. Mel said that pre-merger SIRI was largely owned by retail holders and that prohibited the company from obtaining financing. Well, one thing's for sure, he fixed the retail holder problem in a matter of hours and obtained the financing. Anyone seen anything on the $100 million paycheck for the XM CEO? It would be much better if that guy would take his money in stock and not cash.

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Originally Posted by Dlite

I find it odd that the reverse split was the major talking point from the interview. Look at it in context. To me, it looks like he is saying that a reverse split is highly unlikely.

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I agree. The discussion of the reverse split by Mel was more of an F U to Faber. Faber brought it up, called him out on the stock price being an embarassment, here's what Mel really says if you play the interview backwards:

"Yeah Faber, if I was an idiot we could do the reverse stock split. But then again anyone familiar with the market knows that it is a smoke screen. I trust that there are enough investors with a pair of balls to see the company for what it is. If you want to invest, invest. Let me worry about the stock price."

A reverse stock split probably makes sense just to get the number of shares under control. But that is something that needs to be considered farther down the road. To attempt something like that now, right on the heels of a merger, when the Street has no incentive to believe in this company, or trust in its future would be serving up the company on a silver platter to the shorts. We need demand to support the share price, and I don't think that making it look more expensive is going to do that. Only performance and growth, "Show me don't tell me".