As an investor in both Sirius and XM, I was very concerned with the drop in price following an exceptional quarterly report and subsequent SEC filings relating to an Xm debt offering. What we are seeing today is a common arbitrage play with regard to convertible debt offerings called convertible arbitrage. Such offerings are an open invite to short the common stock against the debt.

These XM convertibles will be converted to Sirius shares. Because Sirius shares are not available to short against, it would have made placement of the debt securities impossible. By providing the shares, Sirius aides in their placement. This is not shorting as we think of in a normal sense. These shares were not on the market to begin with. Other traders are selling into this which is the cause of the decline.

In the Goldman Sachs report, they expected the debt offering to be over 1 billion dollars. Giving credit where credit is due, they saw this coming. However, the offering today is for only half the amount Goldman's analyst Mark Wienkes expected, at only 550 million, which may suggest the stock's decline may be short lived and over-exaggerated.

A company executive said that the offering is necessary for the completion of the merger and relates to xm's refinancing needs. He also noted that as yet, there has yet been no official press release nor any paperwork signed regarding the merger at the FCC, and that it was expected to close by the end of business today. With this offering, XM's debt restructuring is complete.

Also of importance is that the company believes that the NAB will not be filing for a stay of the FCC decision.

Position: Long Sirius, XM.