I Didn’t See This Coming But, I Should Have!
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.
This is a horrible outcome after waiting 17 months for the merger approval. Loyal shareholders are getting fucked. Guess that is what you get for being to loyal.
SI…I share your frustration.
The thing to keep in mind here is that without the official FCC verdict, the company is tied to a chair, its hands bound and duct tape over its mouth.
I’m sure there is plenty of good news waiting to be released following the FCC’s official signing off of the deal..
http://www.fcc.gov/transaction.....chron.html
I have been refreshing the FCC site since 8:00 AM. Is this another game the FCC is playing…holding off on their official release?
If you replay the radio show from last week, I did not expect it to formally close until tomorrow…today would be a welcome victory.
At this point does it really matter? This stock is so hammered the nailhead is off.
What timing.
http://www.reuters.com/article.....sinessNews
Clear Channel said that about 97 percent of the shares voted were cast in favor of the deal. The parties plan to consummate the merger on Wednesday, July 30.
I’m with Brandon here. Don’t let em shake ya. We’ve held this long…you should have mentally prepared for this. Not knockin ya. I FEEL your frustration and am right there with ya brutha.
But I KNEW this wouldn’t be an INSTANT 180 degree move. This is the most manipulated stock out there…
Hang in there. Too much good things to come to bail now. The tide is turning my friend….although not as quickly as everyone hoped. Us longs should get the word “patience” tattooed on our arms. GOd knows we’ve earned it.
Actually I’m really looking forward to this week and every week going forward.
Cheers,
Liam
I have lost so much money trying to hold onto this stock. It is morally reprehensible that the stock can just issue more shares and dilute what little value there is in this stock. I FEELED I HAVE BEEN RAPED AND STOLEN FROM. Thieves are at work here to bankrupt poor, unsophisticated investors in the market.
Cramer to talk how to play the merger tonight on his show. How can he be trusted? I’m sure he will be saying to sell Sirius.
I certainly haven’t held on to these shares for years, to later await a merger, to then see my investment fall by 11% on the announcement of FCC approval. Wow.
i bet he say s buy!
I guess that there is a lot of stuff in the FCC decision that has to be redacted before it can be filed for the public to see. (trade secret info.) That is the likely cause of the delay. The important think to remember is that long term investors need to think long term and that the wheels of Government turn very slowly, especially when the FCC considers that it gave Sirius a huge gift.
Pick the reason of the week… Today reason:
Brandon….
You beat me to it. I was penning a piece titled “The Other Arb Play” when I saw that you published this.
I hope readers appreciate the benefits of having another author on Sirius Buzz
Hi, very interesting article, thank you Brandon.
Would you have a link or a copy of this GS report/analysis we missed?
Thanks,
Orford
Tyler/Brandon, I’m having a nervous breakdown (kidding) so please respond. (As usual, Thanks)
I now own a couple thousand shares of xm. Do you see me getting 4.6 shares of serious for them? I’m gonna buy more today. should it be xm or sirius. I know you’ve answered this before but it seems a lot is changing. Why buy sirius and not xm? A lot of people r doing it.
This is just brutal, feels like a knife in the chest.
We desperately need to hear the official announcement and close of all this refinancing, rebalancing and then the positive reinforcement from Mel & Gary.
You can’t blame them for wanting to get all this out of the way before actual press release and Conference call.
JM,
You are right….our Government put a knife in our chests. They will pay.
Aren’t you glad you waited 18 months for this? … It ain’t done.. three more days of shorting.
http://hraunfoss.fcc.gov/edocs.....4108A1.pdf
Transaction officially approved 7/28 by FCC
This whole process is totally a surprise turn of events to me. I want to better understand this… so… Sirius issued 330 million to UBS and Morgan Stanley, and XM issed 550 million. Were those discounted convertible securities what brought a forced depreciation to today’s share values? Am I right about the 330 from Sirius not being addressed in this article? I just read it on the sirius invester page.
http://investor.sirius.com/Rel.....eID=324564
I saw a drop coming due to the debt refinancing but I didn’t foresee investors taking a short position in XM. I have held some of my SIRI stock as far back as 2003 so I will probably hold on to the existing shares I have left. Cramer will say to buy the preferred stock and avoid the common. Which of course is what I own!! LOL!!!
Dude, Cramer has gotta be kidding me. Trust me I got crushed on SIRI but i still had to laugh at this fucking hippocrit! Think he could have mentioned on what a mistake his double play was at $3? We’re in the wrong business ladies!