I'm beginning to wonder if my vacation was a good thing or bad. Having taken a sabbatical from all things Sirius, I feel like I've come back to absolute confusion among our readers and colleagues. Everything I've read regarding the recent conference call led me to believe it was another awful show on the part of Sirius XM management. I relunctantly decided to listen for myself.
I have to say that I was pleasantly surprised and I do not understand the negativity surrounding the call! I have followed Sirius for many, many years now, and unlike a lot of people, I have made a lot of money with the stock. None recently of course, but I'm well in the black none the less.
This conference call was by far one of the best in years, possibly the best I've heard under Mel. Special consideration should be given to David Frear. For years, I, like most of you, listened to Mr. Frear lay out the numbers on a quarterly basis in a monotone, matter of fact manner that lacked any humility whatsoever.
Think back and you may recall waiting as I did for Mel to read his prepared statement and wishing David would stop talking. David was much more interesting this time around. This call was different. David was much more confident in his tone. He was also much more open to visibility, and offered to work with analysts on their models. This has never happened before. It would seem the street has finally beaten Sirius XM into submission. That is good for investors, and is what Wall Street has been asking for since the inception of satellite radio...CLARITY!
Mel Karmazin also did an outstanding job and clearly demonstrated to me that his intent is to bring Sirius XM to its goal of acheiving cash flow breakeven in 2009. His willingness to answer questions relating to the 2009 debt refinancing indicates to me that he is fully aware that the current stock price is absolutely dependant on Sirius XM concluding its refinancing needs prior to February.
As an aside, one issue that came up in my absence is the potential for a reverse split and potential dilution. I have read a lot of comments opposed to these issues. For starters, let me assure you, that dilution is already priced into the stock and it has been for months. Analysts have been warning of it in every report for nearly a year now. The market looks forward. The only way Sirius XM could have avoided dilution was to have exceptional sales in the third and fourth quarters of 2008. The auto manufacturing outlook made it clear that this is not going to happen.
That my friends is the very reason the stock is trading at a quarter. Speaking of that fact, have you looked at your position in SIRI lately? Not wanting a reverse split now seems ludicrous to me. Sirius has too many shares outstanding which allows the naked shorts to run rampant all over it. Sirius is the most shorted stock on the NASDAQ and also had the greatest increase in its short position than any other NASDAQ listed stock.
The reason that Google for instance, will not split its stock is that a high stock price gives the appearance of greater value. The same goes for Berkshire Hathaway. It is for that very reason that Sirius should do a reverse split. It would also allow hundreds if not thousands of mutual funds to purchase Sirius shares. I would personally rather own 10000 shares at 10.00 a share than 400000 shares at 25 cents. As shareholders we have to support the company in its decision making or dare I say it; risk going the way of Lehman Brothers.
Position: Long SIRI