Lights At Lehman Are On, But No One Is Home
Being in New York City, and more specifically in Times Square, I could not help but take a walk over to the World Headquarters of Lehman Brothers today. It was a sad sight to behold. The lights are on as if everything was normal, but looking in the windows you only see a few people chatting away on their wireless headsets while pacing.
News crews and onlookers converged on the office building that still proudly proclaims the Lehman name. Passers by were quick to snap photos as if they had a feeling that having such a photo would carry some meaning years later. From the outside all appears to be well, but it was the inner workings that spelled the end for Lehman. The sidewalk at the main entrance features an artist with a portrait of Lehman’s chief who is allowing passers buy to sign the piece. Looking at what was written, it is not very complimentary.
Looking to satellite radio, one has to wonder how the credit crisis will impact the company. Clearly, the confidence of the street as well as retail investors is shaken. Invests are supposed to carry risk, but there is always some security in many companies. With the big financials falling on their swords, it becomes hard to tell what is healthy and what is not.
Sirius XM Radio has been impacted by all of the financial happenings as well. They have a debt issue that is looming, and ever tightening markets in which to operate. It is a challenge that will not seem to go away, and stands before everyone like a wall.
The question at this point is whether or not Sirius XM Radio is a healthy company, or a struggling company. The answer depends on how much weight you put on various metrics. If the debt is the biggest determining factor than the equity has a lot of question marks. If top line growth and cash flow are the metric then there could be an argument that the company has health and a decent outlook. There is no denying that the company is growing, and that many metrics are seeing better year over year comparisons, but we are now dealing with a merged company, and the unknowns that surround the satellite radio sector.
At this point investors have gone from wild merger anticipation to convert disappointment, to debt worry, to overall desperation. I have said many times that investors in this sector are battle fatigued. Now they are not only battle fatigued, but frustrated, angry, and depressed as well.
An A-La-Carte radio will not solve this situation, nor will “Best Of” programming. The only solution in my opinion rests with the quarterly results and solving the debt issue. We are quite a ways away from knowing the Q3 numbers, and even when they come out they will likely include many merger related expenses. The financial company’s are not yet out of the woods, and thus, all we have are question marks and speculation.
So at Lehman, the lights are on but no one is home. What is happening at Sirius XM. The music is playing, but is it an even keeled classical tune, an upbeat jazz song, or the debt refinancing blues? Only time will tell. With the stock now well below a dollar, will the artist soon be camped out in from of Sirius XM Radio’s headquarters only a block away? I do not see the current situation as that dire, but also know that investors are at their limits and beyond. In my opinion, virtually any financing of the Sirius XM debt would be a welcomed relief at this point. It is hard to fathom, but people may even be happy to see a loan at 15%! Would it reverse the stock? That is another “time will tell” question, but again, the battle fatigued investors are at a point where they will be relieved with a break even day.
Position – Long SIRI
Does anyone have an opinion of what would happen to Sirius’ SP if GS were to go bankrupt like Bear and Lehman? What would happen to the converts, etc?
Thanks for any feedback.
GIS,
I initially read your question wrong, but as to Goldman Sachs, if it happened to them, I don’t know the answer, but that is a good question, that I have wondered myself.
How about focusing on something that Mel had stated: that he was already in discussions with various lenders regarding the Feb 2009 debt. Everyone is referring to that as the debt overhang, and should that be cleared then it would help. So what is the status of the discussions? To whom has Mel been talking to?
Since GS is so heavily invested, are they an option? How about the institutional investors? How about private equity? The stock is below $1, and could soon be delisted. What about that? Is that part of Mel’s strategy?
I have always been a believer in Mel, and I have always been a strong supporter on the boards. But I have to say what I am hearing from Mel, and what I am seeing, is very much leading me to conclude that this wasnt very well thought out.
The fact that Mel has alot of his own money tied up in this is not doing it for me anymore. Nor is the fact that he has never sold a single share. What I am thinking is that the integration is taking longer than expected, or that XM’s issues are greater than was anticipated. Whatever that is is, I think that the time is coming where Mel will have to step up and do what is necessary: get this debt overhange out of the way, and get the price over $1.
Some of the BIG SHAREHOLDERS need to talk to Mel K. and the Board of Directors right quick, and inform them of what you say Tyler…
I am sure that their are BIG SHAREHOLDERS that feel exactly as us little shareholder feel….only they probably feel worse as they have larger losses.
Unless all of those BIG SHAREHOLDERS are buying right now, and view this as an opportunity.
Shareholders can control and direct the company’s board and CEO’s, but the BIG SHAREHOLDERS must step up to the plate to make it happen.
follow-up: it’s possible that BIG SHAREHOLDERS are already doing this, and we just don’t know it.
also, a BIG SHAREHOLDER could provide a one or two year bridge loan in order to not only protect the company, but also protect the BIG SHAREHOLDER’s position in the company.
Dear Mel
Are you trying to sink the ship and jump out with your mnoney !!!
Airlines charge extra for baggage check $ 25-50 to save their company
Mel, Have you thought asking subscriber for $15 one time extra charge to save the company and pay 02/09 debt. I am certain most of the 20 mil subs would pay $15 to continue listen to their sat rad.
RIMM was to close down the berry, they paid their $ 500 mil to save the shut down, their PPS went from $ 75 (pre 3:1 split) to $ 360
Can shareholder take over the company like others did, MEL is a Dear in front of a 14 wheeler head light
Move over MEL
Maybe this is just crazy or stupid, but what if Sirius XM just reached out to their 20 million subscribers with the following question.
“If Sirius or XM has brought pleasure or enjoyment to your life during it’s existence, can you please make a one time donation of $10, $15, or even $100 to save our company?”
Explain in a simple e-mail that times are tough and that the company needed help.
I will donate $50 (one tank of gas) to get them out of trouble! Maybe this is a little out of the box, but why not?
i’ll donate a 20 spot
I’m in.
The thought of bailing out a company by shareholders and subscribers is innovative.
while i would also pitch in, do you guys realize the shit storm that would come from it? Subscribers that have no clue as to what is happening to Sirius right now would wonder what the hell is going on and it might backfire. Plus you’ll give the shorts and the bashers more ammunition with the letter… I can hear them now… “Mel is getting desperate…”
Everyone just needs to chill, we’re going to be fine.
I own a shit load of shares with an average of 1.30ish and while I am a little worried and pissed off, I’m sticking it out.
Very long: Siri Very short: GS and Cramer
I have been thinking about this for awhile. My thoughts:
Mel should lend the company $100 million in an interest free loan.
He should then go to the OEM auto partners for another $100 million.
Then to the sports leagues, ie NFL, NBA, MLB, NHL for another $100 million.
And then to his other interested parties with self interest for the suvival of the company, ie. Stern, Opra etc for another $100 million.
That will cover the $400 million Feb converts coming due.
Pay back the short term interest free loan from cash on hand and from cash as it comes in.
It solves our short term debt problem and saves the company money since they do not have to pay interest, and it is in every party’s best interest.
Keysmark
If we could could get a combined 25% or more matching funds program from Mell & Friends (Howard ect…), I would donate $100 to help save Sirius, but the lawyers will have to set it up fast. Multiply this by $2.4 million subs. and you have $300 million with matching funds. If you do this with subs. share holders and Sirius employees even better, $10 to $50 each might get it done.
Sirius could do this with e-mail pledges to test the viability first. THINK Mell THINK!
Guys, The Feb. financing issue was discussed by Mel. If you could read between the lines he told you that basically if SIRIXM wanted the Feb. converts refinanced he could do that by just giving in to GS and do a deal like he did to get the merger done. Mel feels he has time to try and do it another way and screw GS in the process. On the flip side of this is that if Mel does give in and gives GS what they want then you can be sure the rest of the financing will fall in line, because GS at that point will have every reason to make sure SIRIXM makes it.
Another well-delivered thesis Tyler . . . note that interbank lending rates are soaring with the overnight dollar Libor rate jumping to 6.43750 percent, its highest rate since January 2001 and compared with 3.10625 percent only yesterday.
This would appear to be due to a massive systemic problem that may not be immediately resolvable.
CEO Karmazin noted in his now infamous Merrill presentation that he has had discussions with several commercial banks at rates ranging from LIBOR + 6 or 7. Tired longs would gladly sign-on for a 13.5% in the current environment.
Talk about manipulation.
I got out 2 days too late at .97 cents, then swore I would stay out until I saw proof that they were not going to .50 cents.
But I saw a recovery from .86 that it for 2 days and got back in at .94 because I thought it looked like it stabilized and would go past 1.00 again – did not want to compound my mistakes.
But then this weekend came and I took a complete bath again Monday, sufferred endlessly through today, going back and forth with bailing out again at even lower prices, .70, .71, .72 all day moving my target higher as it crept off the .68 low.
Then the last 30 seconds a rise from .78 to .88 and luckily for today I had just decided to cancel my sell order.
I live another day.
But some serious manipulation- is something going to be announced for the debt or another GS loading up on a new short position at close to .90.
Bid/ask presently at .88 – .89 4:09 pm afterhours.
Mel, go meet with Morgan Stanley. They just reported nice numbers, made $8 billion, they have the money to lend. Be the first one at their doorstep.
S&P MAINTAINS BUY OPINION ON SHARES OF SIRIUS XM RADIO
S&P Marketscope –
SNPMarketScopeResearchNotes2008-09-16 15:10:25.000SIRISIRIUS XM RADIOT. Amobi – CPA, CFAS&P MAINTAINS BUY OPINION ON SHARES OF SIRIUS XM RADIO
We believe recent market activity has renewed concerns about SIRI’s near-term ability to navigate tough economic and financial terrains. Among reasons we note for unexpectedly sharp sell-off in recent months are a lackluster post-merger update that suggests slowing unit growth, along with mounting concerns about looming debt refi as tight credit markets takes further hold. We are more cautious on potential near-term after selloff, and expect some decisive steps sooner, rather than later, as SIRI treads new realm of potential non-compliance with NASDAQ minimum price rule.|US;SIRI|20706|253970
Seriously, what the $&^%& is going on here.
Are we going up tomorrow over $ 1.00 on some news or get the carpet pulled out again on the first glimmer of hope – (I mean rebound from .68 low to end at .88)
This is just brutal.
At 2.80 on 7/28 premarket & now happy to get a 3 cent gain for the day at .88 cents.
I feel like I’m in the Twilight Zone in the last 7 weeks after the 18 month wait for the merger.approval – Yes Approval !
It was supposed to be a POSITIVE !
At .68 cents today, I said to myself I’d be happy to be out at 1.00 and move on with my life.
Then life in the stock late and hope comes back.
I sound like Friggin, but I’m not.
Now .92/ .92 bid – ask 4:25 pm
Sirius Roadkill – thanks for S & P info.
I bought like the committed fool that I am, another 1500 shares at .83. Couldn’t figure out what the stock price was doing but believe in the company just the same.
Slacker, Pandora, Apple connection using software fixes, I don’t really care. The reality is that this company is in your new car right now and half of the installed equipment is not even turned on generating revenue.
Programming of the company can be on the internet anywhere in the world right now with your subscription. It is consistent programming nationwide, “best of” content anywhere with a lot more than music, and the stock price sucks right now.
I have been saying along with those here, that the debt, unlike some people have said, matters. The next 60 days will determine the companies future in the investment world and to us retail investors.
If they don’t secure financing for the Feb, 09 debt, all confidence will be gone. With that secure pushing the May 09, Performing Credit facility should be easy enough.
In the financial “Killing Fields”, which have now and always will be Wall Street towards companies not able to pay for their debt, this company will survive or fail. With what will easily be over $3 billion in revenue, there isn’t any way that they won’t secure financing. Banks, Investment Banks, and Private Equity, make money by lending money to those companies that can pay them back at a premium. There aren’t many options for them either.
This business model will be funded, period. There aren’t many opportunities for those lending money to improve their balance sheet right now. This company pays its bills, now and in the future. I am long Sirius and will be until its over.
So worrying about whether you paid .65 or .75 or .85 cents for this stock is prudent. Bankruptcy in this economy and market is real to a lot of companies whose business model just collapsed. That is not what is going on with this company. JMHO.
I put this question out there at Seeking Alpha and will put it here; I have a question for people that think SIRIXM is in financial trouble. Why would they be spending almost 250 million to launch a satellite that is not absolutely needed till 2015, when the present ones are passed their OLS. I know you cant wait till the last minute to put a new one up, but you could wait til 2013 at least if the present ones are able to last till 2015. I have to say I would be very pissed if they did go bankrupt and spent 250 million on a satellite launch that they could not afford and did not absolutely need. My point is until I hear SIRIXM push that launch back, I have a hard time thinking they will even have a chance at going bankrupt.
The “Street” will force both Goldman and Morgan to do commercial bank mergers to “get at” depositor liquidity.
Despite Goldman’s pronouncements to the contrary, it is becomming increasingly likely that they will do a merger with Wachovia, as Bob Steel is a former Goldman executive.
A Goldman-Wachovia combination would certainly make for interesting speculation as relates to refinancing the Feb ’09 converts.
I too am worried. But there are too many pluses not to stay the course. My biggest worry is that we go into a serious recession and people have no extra money to spend. But few will give up their cell phone, so I hope that applies to most SIRIUS XM radio listeners. It was good to learn that delisting is only after 180 days to correct things. Oil is coming back to normal and a new administration will be taking over. A year from now we will be much happier. I think the Feb 2009 financeing will help clear the air. Maybe today’s big jump at the end of trading is the first step. Not a good trading strategy, but I haven’t sold a share in the last year.
So Barclays bought a 2B stake in LEH this afernoon and the stock is currently halted … the lights will be back on shortly!
As for SIRI move … well, ya never know! Maybe its simply time for the mm to take out the stop limits, and for some upward manipulation for a change. Then again …
“At this point investors have gone from wild merger anticipation to convert disappointment, to debt worry, to overall desperation. I have said many times that investors in this sector are battle fatigued. Now they are not only battle fatigued, but frustrated, angry, and depressed as well.”
Really? Do you think at .88 /sh that you are talking about the same investor? The investors here now are “Die Hards” with a vengeance. Its time to kick ass and take some names in “actualizing” this company’s potential. The “oh I’m so tire of this crowd” should of left the building.
GS will never bankrupt. So the question on top of the comment section is meaningless. And, to the writer, I understand your worries and we are probably on the same boat as sirius longs, but please be careful what you wish for. We are already with an ‘ugly’ debt which, as I agree 100% with Mel, was inevitable. But we cannot go with anything uglier here. Bad debts usually tear common shareholders into thousand pieces by coming back with its sharp teeth. So what we need here is a decent, manageable financing, not vicious, evil ones.
Thank you for all of it, George Bush. Most probably the worst President since Hoover….Less intelligent than Hoover actually.
SIXM gets sold < 6 months. 1.50-1.75 share.
PLowboy,
You hit the nail on the head! This Bush Administration has systematically put this country in RUINS !! He has caused more damage than 1000 huricane Katrinas could ever do. Just look at the billions of dollars HE is flushing down the toilet each week to finance a sham war that we NEVER should have been involved in. Only fitting that the whole country crumbles as he sings his swan song. The only ones more pathetic than Bush are the ignorant citizens who voted for him….. TWICE !!!!!!!!!!!!!!!
SiriLong –
I’m not into spreading rumours but someone more familiar with GS than me has stated the following –
“You don’t need superhuman knowledge, you just have to be able to read GS’s balance sheet. Specifically the $73B in self-insured, “non-prime,” CDO and real estate backed paper. It is worth-less now that BSC, JPM, LEH, F&F are in the front of the line, liquidating at a few cents on the dollar.
GS has lost their entire $73B L3 pool by refusing to writedown like common mortals, they only had $39B of operating capital at peak performance. Then there is their tiny problem of $1.1T debt. Think they can raise capital in an environment where LEH just dumped $700B of the same, for $0?
Short GS to $0.
Stockholders should sue every GS employee to turn their $6B 2007 “Performance Bonuses” back into shareholder equity. And why stop at 2007?”
This is what I base my question on.
SiriLong – Tell me once again that they will never go bankrupt.
Where do I send my 100.00 to save SIRI
Another 12-hour work day done for the cause and back to the blog … Someone above surfaced the idea of getting subs to kick in to assure company solvancy, ability to operate, etc. BAD idea. I say subs need inducements to buy more products and service. They do not need a capital campaign. Maybe I failed investing 101 but aren’t longs CAPITALIZING the company each time we buy? And what about revenue, EBIDTA, and assets? I can already see the replies, but hold on, reports are that loss decreases offset revenue reductions projected due to slowing growth, and profit is on the radar screen, just not visible yet. Sirius XM needs to get beyond February. That is the biggest near-term issue. I believe that if the Feb dedt gets handled it will decrease the overall negativism about the total ’09 debt because Mel will have demonstrated the ability to manage it, and because a big chunk of it will be past tense, history. What is needed is more SIRI buyers–and deep pocketed ones as a short-smoking counter force. I keep watching volume for BIG money to start flowing into the stock. I know that institutions get prohibited from buying stocks that cost under threshhold amounts, but come on, what about a waiver; SIRI has much-loved products and programming, 18.5M subs as of recent reports, and is a steal at the SP lately. Someone at institution level with the right authority, some balls (genderlessly speaking) and common sense must see the company’s prospects on the business side as H-U-G-E ! ! !. And, briefly, I need to reply to the Bush bashers above. I was in the military through Clinton’s two terms, and a lot longer (Nixon to Bush Sr.). Except perhaps for his economic policies Clinton was the worst leader since Carter, who we can thank for our troubles with Iran today because of his failure to act decisively in December 1979. Bush for all his shortcomings including arogance is head and shoulders above Clinton and Carter. But this is a stock blog so pardon the rhetoric. Regarding the comment above on Barclay’s and Lehman, I read the WSJ article earlier today about it. Salvaging (transfering) up to 9,000 jobs is included as well. Listen, let the bankers fight their own fights; we’ve got to focus on SIRI. Besides, I bet Mel is at work right now on getting to terms on the upcoming Feb debt. We longs worry too much. I’m down 50% as of today but not going to stroke out on it. Long and holding.
The movement of SIRI and the market today and afterhours is tied dirctly to AIG.
I’m not sure who will save the government once they finish taking major stakes in all these failing co’s. The $ must be printing day and night.
Gov’t should allow Sirius to borrow 500 Million at low interest rates after this DOJ & moresow FCC debacle.
You’d have a better chance of finding a needle in a hay stack and GS going bankrupt in next 6 months.
BUt it would be nice.
Sorry guys. I’ll take my hundred bucks and buy another 125 shares.
hey steve,would you have the guts to tell our brave troops who are protecting you, that bush is flushing billions on a sham war.
i bet your answer is send em flowers and say “peace man”
Steve Says:
hey holdon, I was one of those brave troops that used to protect this country, and I can tell you that not all of our brave troops are super patriotic G.I. Joe types ready to give their lives for their country and their not so brave Commander and Chief, who’s daddy made sure he would never serve in Vietnam. A big percentage of our troops are demoralized, confused and scared shitless at this point; the media throws the word “hero” around indicriminately and irresponsibly. Flowers and “peace man”? – that’s just not going to cut it. My answer is: Get these guys out of this hell hole NOW ! Enough heros have been slaughtered, and this debacle has gone on way too long. Unfortunately, the only flowers some of these troops will get will be at their funerals.
Plowboy and Steve, You 2 must be young. Carter was the worse President. Lets see here we had at that time Double digit inflation, unemployment, and interest rates. Compare that to what we are going through now and these are happy days. I will also add it was the democrats in congress that blocked a bill sponsored by McCane in 2005. Which called for more regulation on Fanny and Freddy. As a matter of fact in his statement, he said if this bill was not passed he worried that the tax payers are the ones that are going to be the ones stuck for it. It called for harder terms on loans. The democrats blocked it because they as always felt that it was everyones right to be able to buy a house. It is the democrat ideology that got us into this mess.
So boys before you try and put the blame on someone I think you should know your history.
Plowboy, hows that Adelstein voting for the merger working for you. I TOLD YOU SO.
You boys want to talk about dumb look in the mirror. Plowboy most likely still blames the republicans on the FCC board for the hold up, even though it was only the democrats that voted against it.
Hey john – thanks for your opinion on things however doesn’t your argument state that republicans are responsible for the allowed merger and subsequent drop in share price?
I’m an independent and believe that long term the merger was right but completed in the most unfortunate of times.
I am not trying to outsmart anyone here, but can’t you see how FRB and SEC moves for GS??? There seems to be a very strong ties between FRB/SEC and GS, and it almost seems saving GS is their ultimate goal. Watch and learn. They will do anything to save GS. That’s how things work there. I hate GS, but I can say it again. They will not BK.
Well with Hank running the treasury I’m sure he’d do anything to save his buddies.
John, you must be old…. and senile. You think these are happy days? Your home health aid needs to increase your alzheimers medication. Your argument is complete bullshit, and calling Plowboy and me dumb, because we have an opinion you don’t agree with, demonstrates clearly just how ignorant and intolerant you are. Sirius/XM can thank the government, under the watch of the totally inept Bush, for the mess that they are in. I won’t lower myself to your level and say that you’re dumb, because that would be insulting and hurtful. However, with all due respect, I would be remiss if I failed to mention that you are obviously an idiot
GIT, So are you saying that you would rather the FCC kill the merger. What I am saying is if the republicans controled congress the merger would have been approved alot faster. martin would not have had to worry about (democrat) congressional oversite commitees.
Steve, First of all I said compared to the Carter years these are happy days and anyone alive back then when Carter was President would agree with that.
Next back in 2003 The Bush administration tried to push a oversite commitee on Fanny and Freddy 40 democrats and 11 republicans killed it. Fanny and Freddy are the root cause of the mess in todays financial markets. The two people you can blame that were front and center are Dodd and Another democrat that I cant remember his name at this time.
Once again McCain also tried to reform Fanny and Freddy When he cosponsored a bill that would do just that it was killed by the democrats (with 4 republicans help).
john – we can look back now and say things should have been different just like what people are saying now about the war in Iraq. The fact of the matter is when you have the majority of the people so supportive of something, reasoning sometimes gets thrown out of the window. The housing boom created hundreds of thousands of jobs helping us drop our unemployment rate down into the low 4’s. Was that bad? People had their home values increase (albeit rediculously) that allowed for the expansion of personal spendable cash which in turn increased earnings for companies. Personal spending increased helping our country because isn’t that what our country is pretty much based on. I could on and on. Why do we continually try to blame others in the past. Our memory as human beings can be so short. We need to look forward and determine what needs to be done to better our futures.
Steve, the other congressmen was Barny Frank (D)
GIS, That is a good point. That does not change the fact that people like Steve and Plowboy are blaming the wrong people for what is going on now. I just corrected them using facts.