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Thread: Equity Offerings and Related Share Borrow Facility

  1. #1
    zcurzan is offline
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    Equity Offerings and Related Share Borrow Facility

    Shares to facilitate hedging for XM Exchangeable Note Offering
    Shares will not be considered outstanding for accounting purposes


    NEW YORK, July 28 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio Inc. (Nasdaq: SIRI - News) announced today the commencement of an offering of shares of its common stock. The common stock being offered represent shares of SIRIUS common stock that SIRIUS will be lending to affiliates of Morgan Stanley & Co. Incorporated and UBS Investment Bank, the share borrowers, pursuant to share lending agreements between SIRIUS and each of the share borrowers. It is estimated that, based on current market values, approximately $375,000,000 of SIRIUS common stock will be sold in a fixed-price public offering described below, and up to approximately $65,000,000 of SIRIUS common stock will be sold as described below from time to time at prevailing market or negotiated prices. The exact number of shares of SIRIUS common stock to be offered will depend on the terms of the concurrent offering of exchangeable senior subordinated notes described below and the hedging to be conducted by investors in such notes. While the borrowed shares will be considered issued and outstanding for corporate law purposes, SIRIUS believes that under U.S. generally accepted accounting principles currently in effect, the borrowed shares will not be considered outstanding for the purpose of computing and reporting earnings (loss) per share because the borrowed shares are required to be returned to SIRIUS.

    The common stock offering is being conducted concurrently with a private offering by XM Satellite Radio Inc. of $550 million aggregate principal amount of Exchangeable Senior Subordinated Notes due 2014 ("Notes") which will be exchangeable into shares of SIRIUS common stock. The terms of the Notes, including the interest rate and exchange ratio, will be determined at the time that such offering is priced. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States or to U.S. person absent registration or an applicable exemption from the registration requirements of applicable securities laws.

    In connection with the common stock offering, SIRIUS will enter into a share lending agreement with each of the share borrowers, pursuant to which SIRIUS will lend shares to the share borrowers. The share borrowers will sell a portion of the borrowed shares in a fixed-price public offering expected to close concurrently with the Notes offering. After the closing of the fixed- price offering, the share borrowers will offer and sell the remaining borrowed shares in one or more registered public offerings at prevailing market or negotiated prices. Over the same period that the share borrowers sell the remaining borrowed shares, the share borrowers or their affiliates expect to purchase at least an equal number of shares of SIRIUS common stock on the open market and/or enter into derivative transactions providing it with a synthetic long position equal to such number of shares. SIRIUS will not receive any proceeds from the sale of its common stock by the share borrowers other than a nominal loan fee equal to $0.001 per share issued to the share borrowers. The share borrowers will be required to return the borrowed shares pursuant to the share lending agreements following the maturity date of the Notes or their earlier retirement.

    Morgan Stanley & Co. Incorporated and UBS Investment Bank will act as sole underwriters for the sale of the borrowed shares. A prospectus can be obtained by contacting Morgan Stanley & Co. Incorporated, 180 Varick Street, New York, NY 10014; Attention: Prospectus Department or by email at prospectus@morganstanley.com or by contacting UBS Investment Bank, Attention: Prospectus Department, 299 Park Avenue, New York, NY 10171, (888) 827-7275.
    What is this about? Just another step in the refinancing of XM's debt? The headline makes it pretty clear that its not dilutive to EPS according to GAAP, but could this be part of the reason the market is slow to buy Sirius this morning?

  2. #2
    homer985 is offline
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    I misread it myself this morning -- and had to read it closer to figure out what was going on. Here was a post on Yahoo I just posted in the thread there...


    ~~~~~~~~~

    I just re-read the Press Releases from this morning and see now that I errored here. I only briefly read them this morning, when I was really busy... then commented here to Floridadave about this -- taking his word for it. Shame on me for doing it, because he is wrong -- as was I. I thought this was a separate offering altogether, but see now that it is a part of the XM refinancing deal announced today.

    This is not dilution. This is a share lending program, where Sirius is lending the shares to the buyers of the Convertible Debt -- which will allow them to short the shares, via a Convertible Arbitrage investment play. These shares are registered and outstanding to the public, but not considered into the outstanding share total for Sirius in their calculation of EPS. Think of them as "legal" naked shorts... although the sellers will have the convertible notes for covering purposes.

    For those that do this investment strategy -- If/when the Convertible Notes mature and convert into shares -- the short sellers will convert their notes to shares, then deliver the shares back to Sirius to close their short position, and Sirius can retire them.

    It's a very interesting move. Regardless, it is not new dilution since the shares won't be counted in with the "outstanding sharecount" for Sirius' financial purposes, therefore they won't necessarily be calcualted into Sirius' Market Cap or their Enterprise Value... thus it is not dilutive.

    And since XM is using the funds raised to buy back old debt -- there is pretty much no new dilution hitting via these moves at all.

    Why the drop today? The market is taking it in the ass; plus many investors probably don't understand what this refinancing today does and if it is dilutive or not; plus I wouldn't be surprised if Morgan Stanley and UBS began shorting the newly registered (and borrowed) shares immediately today. And finally... although there have been comments made by the Commissioners -- the FCC has not formally announced the official word on the merger yet, via their press releases... they must issue a Report & Order; plus the Consent Decree; plus the dissension of opinion from Copps and Adelstein.

    But that's just a guess...



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  3. #3
    crfceo is offline
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    I had misread it myself this morning. Brandon wrote about too...


    http://siriusbuzz.com/

  4. #4
    akos76 is offline
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    Post Just one question

    Hi,

    I lost thousands of dollars on SIRI today! It's very bad. Do you think it will drope more? What do you guys think for this week? I bought it on 2,42 Keep it or not?

    Regards, Akos



    Quote Originally Posted by homer985 View Post
    I misread it myself this morning -- and had to read it closer to figure out what was going on. Here was a post on Yahoo I just posted in the thread there...


    ~~~~~~~~~

    I just re-read the Press Releases from this morning and see now that I errored here. I only briefly read them this morning, when I was really busy... then commented here to Floridadave about this -- taking his word for it. Shame on me for doing it, because he is wrong -- as was I. I thought this was a separate offering altogether, but see now that it is a part of the XM refinancing deal announced today.

    This is not dilution. This is a share lending program, where Sirius is lending the shares to the buyers of the Convertible Debt -- which will allow them to short the shares, via a Convertible Arbitrage investment play. These shares are registered and outstanding to the public, but not considered into the outstanding share total for Sirius in their calculation of EPS. Think of them as "legal" naked shorts... although the sellers will have the convertible notes for covering purposes.

    For those that do this investment strategy -- If/when the Convertible Notes mature and convert into shares -- the short sellers will convert their notes to shares, then deliver the shares back to Sirius to close their short position, and Sirius can retire them.

    It's a very interesting move. Regardless, it is not new dilution since the shares won't be counted in with the "outstanding sharecount" for Sirius' financial purposes, therefore they won't necessarily be calcualted into Sirius' Market Cap or their Enterprise Value... thus it is not dilutive.

    And since XM is using the funds raised to buy back old debt -- there is pretty much no new dilution hitting via these moves at all.

    Why the drop today? The market is taking it in the ass; plus many investors probably don't understand what this refinancing today does and if it is dilutive or not; plus I wouldn't be surprised if Morgan Stanley and UBS began shorting the newly registered (and borrowed) shares immediately today. And finally... although there have been comments made by the Commissioners -- the FCC has not formally announced the official word on the merger yet, via their press releases... they must issue a Report & Order; plus the Consent Decree; plus the dissension of opinion from Copps and Adelstein.

    But that's just a guess...



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  5. #5
    rjr is offline
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    Well we all have opinions about what will happen next, but as they say, its best to do your own research and make your own decision. I still believe in sat radio long term, but others have very valid arguments why they believe sat radio's days are numbered. A lot of those arguments begin with WI-MAX or the equivalent.

    Short term? I have no opinion. This stock is simply too hard to predict....

  6. #6
    akos76 is offline
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    What you mean sat radio's days are numbered?
    As I read here http://news.morningstar.com/newsnet/...YM057_univ.xml everithing is OK! It schould be OK!


    Quote Originally Posted by rjr View Post
    Well we all have opinions about what will happen next, but as they say, its best to do your own research and make your own decision. I still believe in sat radio long term, but others have very valid arguments why they believe sat radio's days are numbered. A lot of those arguments begin with WI-MAX or the equivalent.

    Short term? I have no opinion. This stock is simply too hard to predict....

  7. #7
    Newman is offline
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    I appologize if I offend anyone out there, but I have heard this SOOOO many times over the past month that I just HAVE to get this off of my chest:
    (This post is directly pointed at akos76 and everyone else who has said similar things in comments on articles and here on the boards)
    Quote Originally Posted by akos76
    Hi,

    I lost thousands of dollars on SIRI today! It's very bad. Do you think it will drope more? What do you guys think for this week? I bought it on 2,42 Keep it or not?

    Regards, Akos
    Sirius closed today at $1.88, down 0.37 for the day during regular trading, and as of th time of this writing, an additional 12 cents for a total of 49 cents for the day. Assuming that your "thousands" that you lost is, at the very minimum, $2000, that means that you hold a minimum of 4081 shares. You bought in a $2.42/share, which means you have a total investment of $9876.02 at a MINIMUM.

    If you bought in at $2.42, you obviously jumped in for the merger speculation. Do you simply throw around 10 grand without thinking about what could happen to your money? Did you do any research into these highly speculative securities prior to investing in them? Did you realize that prior to you buying in at $2.42, billions of shares have traded for upwards of 15 times this amount? Did your research not reveal that prior to your purchase point, Sirius stock value had declined nearly 60% over the past year?

    Either you are a stupid investor who lies about the size of your investment into these securites, or you are a stupid investor who bought on speculation without thinking of the consequences.

    Should you sell here? Yes, get out now.

  8. Ad Fairy Senior Member

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