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Thread: Value of Assets

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  1. #1
    illuminance is offline
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    Value of Assets

    I spent some time looking at the Balance Sheet. Under Assets, it has Property Plant and Equip @ $800mil. I am trying to get my arms around the value of the satellites and spectrum. I would think it would be worth considerably more than $800M. (And since it is lumped in with all other PPE assets, it obviously has a book value less than that).
    A company that wanted to start up in SATRAD...how much to do that...to buy, launch satellites...and have the govt licenses to the airwaves....
    The point I am getting at is it seems like a low-ball #. I wonder if the BS more accurately reflected the assets, then maybe better financing could be obtained since the risk of BK would be lessened by having more valuable assets.

    What am I missing?

  2. #2
    crfceo is offline
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    I think you're missing the point that there is no chance of bk...

  3. #3
    zcurzan is offline
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    So basically an asset is capitalized because at some point it is going to be used to create a stream of revenue.

    I'm not really familiar with the specifics of how they accounted for the spectrum itself. I would assume it was capitalized at its auction price, and is being amortized over some given period. The satellites certainly are.

    It might be "low balling" the market value of them, but you can't really get around United States GAAP. (Generally Accepted Accounting Principles). Assets are on the books at historical cost, and are only adjusted to the downside when impaired.

    You could make the same argument for almost any corporation out there. But if you let all companies write up any and all assets to market value at any given time, you are distorting the matching of the true expense of the company that they are using to create revenue.

    The true value of their infratructure is certainly not lost on anyone, and if a purchase situation arose, you would see the excess value materialize on the acquirers balance sheet as goodwill, the amount paid in excess of the book value of assets. It's just one of those things that goes understood.

    Similarly, wouldn't see Microsoft (or anyone) capitalize the value added of their employee base, or the fact that they are dominant in their industry. You can't assign a dollar amount to it really, its just "value added" to what is physically reflected on the books.

  4. #4
    jscreep is offline
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    The true value of their infratructure is certainly not lost on anyone, and if a purchase situation arose, you would see the excess value materialize on the acquirers balance sheet as goodwill, the amount paid in excess of the book value of assets. It's just one of those things that goes understood.


    Well then the value of XM's spectrum should be reflected on the SiriusXM Balance sheet under the goodwill line, 6 billion or so, am I correct?

  5. #5
    zcurzan is offline
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    Good question. I haven't looked at the combined financials to tell you the truth.

    I don't think you would see the full amount, because based on the final purchase price after the stock plummeted and the transaction closed, the dollar value was much smaller than when the merger had been propsed 17(?) months before. Plus, I don't think the original 4.6x offer was meant to pay "fair value" for the spectrum. Guessing it wouldn't have even come close. On the other side of goodwill, if the purchase price was LESS THAN the net book value of XM, Sirius would have written down a bunch of assets.

    Anyone have those numbers handy? The final purchase price and the book value of XM?
    Last edited by zcurzan; 09-15-2008 at 03:38 PM.

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