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Thread: Could this price drop be by design?

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  1. #1
    spanyo is offline
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    Could this price drop be by design?

    I know this is an all stock deal, but if they can put down 2.6 billion instead of 3 billion on the books, is there an actual financial benefit for Sirius.

    homer985 wrote "... I wouldn't be surprised if Morgan Stanley and UBS began shorting the newly registered (and borrowed) shares immediately today."

    It got me thinking...
    Last edited by spanyo; 07-28-2008 at 05:05 PM.

  2. #2
    seraphim77 is offline
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    Yes, Spanyo. I've been wondering that too. By driving down Sirius's price, they are getting XM for a song. They may very well be willing to let Sirius's price go as low as possible, in the short run, so that they can get XM dirt cheap. Very clever (and very, very shrewd). The worst thing for the small investor to do is sell now.

  3. #3
    deewcom is offline
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    Squeezing the Arbitrage Spread

    So that most small retail investors get screwed on even that play. The XMSR bid is currently lower than it's close. Maybe XMSR won't exist tomorrow. That's what cfrceo confirmed with phone calls - today was the last day for XMSR. We thought we had it bad with Fridays SP's. Now we're even worse off than Friday. We say we are believers in the product and its potential growth, the Powers That Be are making us prove it.

  4. #4
    seraphim77 is offline
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    Oh, gee. That's even worse news, deewcom. I guess Mel had an ace up his sleeve after all. Too bad he played it on us!

  5. #5
    john is offline
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    I have to say, if you really think this way you are nuts. It is a all share deal the price does not matter.

  6. #6
    seraphim77 is offline
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    The way I see it, the timing is just too odd for it to be a coincidence that Sirius would announce the sell of 375 million shares on the very day everyone expected the pop. The demand was there (72 million shares traded) but Mel found a way to cap demand for Sirius by flooding the supply side of the equation.

  7. #7
    spanyo is offline
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    If closing price doesn't matter, then this thinking IS nuts. But it has been implied that there may be a benefit to putting a lower price in the books. This is beyond the scope of my knowledge. That is why I asked the question.
    Last edited by spanyo; 07-28-2008 at 07:08 PM.

  8. #8
    john is offline
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    seraphim77, I dont know how long you have been following this stock. But there was an analsyst out, that said that they were working on financing this deal back in May and then were pulled away from that, to work on the FCC approval. He then stated that both would most likely be anounced at the same time or very close to each other. This was used to finance the deal. They needed to do it or do you want them to be in limbo still. With the credit market the way it is, it is not a bad way to get the deal and the rest of the financing done. I guess some would rather have an out of control interest rate to pay on 500 million. I find it a good way to lower the dept and keep the cost down. Who likes paying that much interest.
    Last edited by john; 07-28-2008 at 07:25 PM. Reason: change

  9. #9
    deewcom is offline
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    Price Matters

    It matters to retail holders who will be forced out via margin calls. It matters to those who did not buy at the right prices of either SIRI or XMSR to benefit from the arbitrage spread. Arbitrage was tricky to play as it mattered what a speculator paid for each stock and it mattered that the spread narrowed so tightly today. In the long run, it may not matter as much as it matters now. That is, if and when the combined company SP reaches a profitable level, then nobody will care much about what happened today or what will happen in the near term. For now, there are many who have taken it in the neck because the sharp decline in price will take them out in the next day or two (when they will have to pony up cash for their margin calls or sell on the cheap). Via recent actions, Mel sacrificed many retail holders at the throne of the big investment houses in exchange for financing his project. Kinda sucks to be us right now.

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