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Thread: Could a failed merger benefit the Sirius stock?

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  1. #1
    SiriusBuzz is offline
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    Could a failed merger benefit the Sirius stock?

    Do you ever feel that if the merger did not go through that the Sirius stock price would stand to increase just as much as if the merger was allowed? What I mean is, at this point XM must be weighing down the Satellite industry as a whole with their dismal numbers so, if Sirius separates themselves from XM, their beaten down stock should shoot right up. Thoughts?

  2. #2
    SSG is offline
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    Both companies have advantages and disadvatages as stand alone entities. In my opinion, a failed mereger will likely bring in a new player that will try to buy out one or the other company. That is what will drive a spike if the merger fails.

    The synergies of this merger can be very substantial. It will become attractive more quickly in my opinion if the merger happens.

    My fear is that if an outside "force" gets ahold of one of these companies, the ramifications could be something that consumers were hoping to avoid. Time will tell

  3. #3
    Newman is offline
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    I am in agreement with SSG. I think if the merger is denied or fails, another service will come along and pick up one of the companies cheaply since market caps have plummeted since the merger was announced, and will tank again when the news of the merger death is announced. The curiosity is which one will they pick? As of today, the market cap for SIRI is 4.21b and XMSR is 3.45b, a difference of 0.76b. If you look at the enterprise value however, SIRI is 5.08b and XMSR is 4.72b, a difference of only 0.36b. With these much closer values, I think it would be SIRI that would be picked up first. Combine those values with the fact that most consider SIRI as best of breed now even though XM currently has more subscribers.

    The question is more of which company would step in with an offer?

    As far as XM weighing down SIRI, it has been that way for the last two years. XM has had extensive issues, where as SIRI has had very few. Yet SIRI continues to trade in tandem with XMs stock price. I think the main thing that is keeping XMs stock price up is the fact that XMs institutional holdings make up 60% of the available shares, where as SIRI maintains only 28%. Institutions dont buy and sell like the public, meaning there are a lot less available shares of XM than SIRI, making the price remain higher. One key point: The institutional % for XMSR has dropped nearly 20% over the past 9-12 months. How long will the stock price remain high without the merger exchange holding it up?

  4. #4
    clueless is offline
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    If the price of XM does fall without the speculation of the merger holding it up could the price of SIRI increase on speculation alone? I think Sirius still falls under that speculation category of stocks and with Sirius gaining steam as a company, could the price of the stock be driven up on that alone?

  5. #5
    Newman is offline
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    Clueless: at this time I dont think the stock price of SIRI is going anywhere.
    With the merger overshadowing pretty much everything, that and that alone will move stock prices. That combined with the fact that XM is probably weighing SIRI price down as well. Remembering that the merger agreement set a fixed price of 4.6 shares of SIRI for every one share of XM, people will not pay more for SIRI because of the premium that XM shares will fetch, but they dont want to pay much for XM shares because of the posibility that the merger will be crushed.

    For now, I think the stock prices will remain fairly stable... and crappy. Unless XM and SIRI both come out and surprise people with their next quarterly report or something. People will have to have faith in BOTH companies in order for anything to go up.

  6. #6
    clueless is offline
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    Quote Originally Posted by Newman View Post
    People will have to have faith in BOTH companies in order for anything to go up.
    You mean as long as there is the possibility of the merger...correct? I wish we just knew now one way or the other, the suspense is killing me.

  7. #7
    Newman is offline
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    Quote Originally Posted by clueless View Post
    You mean as long as there is the possibility of the merger...correct?

    Yes, I mean as long as there is the possibility of the merger. Because of the fixed share price agreed upon in the merger, the two stocks will trade in tandem.

    If the merger is squashed, they will begin trading independantly. Until then, so goes XM, so goes SIRI, and vice versa.

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