I've stated it once, and I'll reiterate it now... the Book Value of this stock is somewhere in the mid to upper $0.30's -- depending on how you value the Sirius license. That said, any more depression in the Market Cap would be overkill.
If this stock is forced to R/S, I do not believe that the Market Cap can come down much more -- without the company becoming a target of a takeover bid. It's value is just worth more than that.
Think of it this way -- a 1 for 50 R/S would leave the company with 64 million shares at $13 each. Do you really believe that the stock would drop to $1... futher dropping the Market Cap down from the current $830 million range to $64 million???? Even a drop from $13 to $10 would cut the Market Cap from $830 million to $640 million.
These are companies that had a combined Market Cap of $6 billion just a little over a year ago.
Sorry, I disagree strongly with your opinion. If the stock was above its Book Value, then I'd think twice... but for as long as it's below? No way.
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Newman, when you say available -- what are you referring to? Did you mean shares available to be issued? Or shares registered for issuing?
What I'm getting at, is that Sirius has 3.2 billion shares outstanding and I believe another 500 million reserved for issuing for current convertible instruments. However they are authorized to issue up to 4.5 billion shares currently -- so they do have the ability to issue another 800 million shares at any time.
So if that's what you're talking about -- that there isn't a high enough ceiling, then I agree with you. But if you're talking about registering shares -- convertible debt is typically issued before the shares are registered for issuing. They could issue 800 million at $0.25 each via a convertible, to raise $200 million.
Also, neither of Sirius' convertible debt issues are secured, they're both unsecured bonds.
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Last edited by homer985; 11-09-2008 at 09:24 PM.
Assets minus liabilities, minus goodwill, minus intangibles... then adjusting for deferred revenue and the current fair value of the Sirius license -- which is not fully recognized on the balance sheet.
Then divide the remaining amount by the outstanding shares (common and preferred).
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It's not a model... it's just the math taken directly from the ProForma filing that was attached to the last 10-Q. Yes, there are reasons for the adjustments made...
Total assets: $10,614,029,000
Take out Goodwill: $5,798,406,000
Take out Intangibles: $437,000,000
Add in adjustment of Sirius license to current fair value: $1,216,346,000
Assets remaining: $5,594,969,000
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Total liabilities: $5,899,961,000
Take out all deferred revenue: $1,365,470,000
Liabilities remaining: $4,534,491,000
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Subtract the two: $1,060,478,000 (aka, stockholder equity)
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Class A sharecount: 3,176,663,555
Series A sharecount: 24,808,949
Total sharecount: 3,201,472,504
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Divide stockholder equity by sharecount: $0.3312/share
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Thank so much Homer!
Can I ask you how you are arriving at the fair value of the license and any other adjustments you have made?
Last edited by Demian; 11-09-2008 at 09:50 PM.
First, when Sirius and XM "bought" their licenses from the FCC -- Sirius paid about $83 million and XM paid $89 million. They both carried that value on their books all along. When Sirius merged with XM (bought), the license for XM was adjusted to what they believe is the current Fair Value. They estimated the Fair Value to be between $1 billion and $1.5 billion -- so they went with $1.3 billion and adjusted the XM license from $89 million to $1.3 billion.
However, the Sirius license is still valued at $83 million on their books... it needs to be revalued up. I increased it to match the XM license at $1.3 billion. Some may question this, but I point out that the current 700MHz band sold for $20 billion -- which comes to about $2.5 billion per 12.5MHz block. I'm not going to say that XM and Sirius' block of bandwidth is worth that much -- but it's certainly not worth $83 million. I believe that $1.3 billion is fair -- but could be a little higher.
Second, the deferred revenue are subscribers that prepaid for service. They would not become creditors in a bankruptcy proceeding. In fact, in Chapter 11 they would remain on the books as liabilities until they receive their service. Nothing would change. My liabilities calculation is just straight debt and accounts payable, etc....
The other adjustments are self-expanatory...
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These numbers are purely based on the ProForma attached to the last 10-Q. It will obviously change with the next filing this week.