Merrill Issues Report On Sirius XM
Long time media sector analyst Jessica Reif Cohen of Merrill Lynch has issued a report on Sirius XM Radio. Her report notes that the company is seeking authorization from shareholders on additional authorized shares, as well as a reverse split.
Cohen notes that the reverse split is to ensure compliance with NASDAQ’s $1 listing requirement, but also noted, “…the share authorization is to provide financial flexibility to meet the $1.05bn of 2009 debt maturities as stated, ‘…, we may choose to issue shares of common stock in satisfaction thereof (debt maturities).’ Given distressed trading levels of the debt and shares, incremental equity capital seems challenging. However, we can not rule out debt for equity swaps, with the incremental share authorization facilitating exchanges with convert holders (at what ratio unclear). Regardless, the risk for existing equity holders is dilution.”
Cohen reiterated Underperform on SIRI citing:
- 2009 debt refinancing risk
- Risk of dilution to the equity.
Taking things a step further Cohen also stated that Merrill will be reassessing their current PO of $1.00 considering SIRI sales channels have come under increased pressure with:
- MLe forecast for U.S. auto sales lowered to 12.5mn SAR from 14mn SAR (SIRI guidance on 09/09/08 was based on14mn SAR
- Deteriorating outlook for U.S. discretionary retail spending
Lastly the analyst states, “However, we think it is worth reiterating that if Sirius is successful in refinancing its 2009 maturities, the risk profile of the company would fall significantly.”
The average price target by analysts continues to be very low, and while investors are expressing frustration, there are not many positive aspects in nearly any equity in the market. The next likely step for Merrill and others will come when the company issues their third quarter results. Should Sirius have a positive result in their financing, the big overhang on opinion would be removed, leaving room for not only more positive opinions, but more positive outlooks as well.
Position – Long SIRI
Cos…
Good letter and you’re points represent how a lot of feel as stockholders.
I am afraid all you will get back is the token e-mail, let us have your number so we can call you and tell you “We don’t know and we are doing our best”
Let’s hear what they have to say at the Q3 report. I know all of you will be listening to it like I normally do. Hopefully we will get good news for a change and an answer to the Feb note.
If we don’t like what we hear perhaps we can organize the stockholders through all the web sites and get a resounding No vote in December and go from there.
imho
vaporgold
vaporgold…
It is a start, and hopefully not the end… I am not sure yet of all the other places that sending a copy of this would help, but I am open to suggestions and any additions or changes that could be made to enhance its effect.
Someone correct me if im not mistaken, but why doesnt Mel just sell the XM headquarters? I remember he said that as a possibility at the merrill lynch conference in september.
I dont know how much the building would be worth, but its gotta be some millions.
Using those proceeds and combining with cash on hand should be able to take the feb 09 debt out of the picture I would think.
thankyou cos.!!!
Need to cut the fat and raise some capital for debt Mel. Move the employees you will keep to Sirius hq.
Ok guys . . . ya now have the “Cos” template in-hand . . . the heavy-lifting has been done for you. Get to work. Write the BOD, write Mel. Tell them that you plan on attending the December BOD meeting and expect that there will be sufficient room to accommodate you and enough time allotted for remarks.
Remind them that a good number of the so-called “unsophisticated” investors are also loyal customers, a fact that seems to have escaped Mel. Remind Mel of his generous offer to loan the company his own money for the Feb converts. Demand a detailed accounting of any and all efforts thus far made to secure that financing, including the number and types of institutions conferred with and the terms that are being offered, if any (note to Mel’s blog screeners: no 11th hour surprises this time; this time the common shareholders will be the ones “shopping for a friendly judge” Mel).
Tell Mel how many shares you own and remind him of the voting powers vested in those shares and how you will exercise that right.
Let him know that reorganization is not an option and that a massive, coordinated, cancelation initiative will be mounted by effected shareholders. Tell him directly that you will cancel your subscription. Tell him that a coordinated monitoring and boycotting of sponsors will be undertaken.
Dave . . . I am considering the NYC board meeting in December. A back-up plan for an outside rally should be coordinated in the event we are not admitted. Media outlets will need to be notified of the rally and prhaps some prepared remarks delivered as well as obtaining any necessary “assembly” permits. This or another website could post a printable lapel ticket that could be cut-out and worn to the meeting location so that we can identify one another(note to Mel’s blog screeners: tell Mel it doesn’t have to be this way).
Other interested parties should post here to assist in the coordination.
Thank you COS for your eloquent to the point letter to IR.
Maybe you should send a US certified mail letter directly to mel for which he or someone will have to sign to receive it.
VAPORGOLD..I got an eamil from Mike HARTLEIB…
His resonse was as follows…
Yes but it would be a Derivative, or a shareholder class action. call me at 714-927-5898 or give me a number to reach you.
I have not responded to him yet.
From what I have heard hear from Brandon and Tyler, who have talked many times to Michael Hartlieb, he filed a lawsuit against the company regarding the FCC requirement that they produce and offer for sale, an interoperable radio to the public without the merger. This was a condition of their license agreement with the FCC. I am paraphrasing hear but, he claims that the two companies failure to bring this device to the retail market cost shareholders of both companies and injured consumers by not meeting this FCC license requirement. He asked the FCC to consider this matter before granting the merger and the FCC refused after reviewing his claims. He also filed, and I’m not a lawyer, an appeal after the merger was granted. Shark and Brandon had a lengthy discussion regarding the filing and its validity one fine Saturday and I haven’t heard anything else since.
Michael has posted on the forums his position many times and appears to be open to conversation. I myself haven’t pursued talking with him because I felt he contributed to lengthening the FCC process and that he was a distraction. That is not to say I didn’t feel he had the right to do so. Look at us now, maybe we should have paid more attention. He was at the time a significant investor in Sirius. That all I know and I hope I have the details right.
SiriusHope, do you have that address for me? I’d be glad to mail it.
COS this is the address….
Sirius XM Radio Inc., 1221 Avenue of the Americas, New York, New York 10020.
TY COS for info on Mike Hartleib..i will decide when timely about contacting him to hear him out about these new matters facing us stockholders
Guys I found this on seeking alpha.Cos1000 and gekko13 make some awesome points. After reading it Im beginning to see a whole different picture on the RS.
“COS, thanks for the backup but I’m far from being a genius; some of you guys are much better informed than me. I’m just trying to figure out the “why’s” and came up with the most logical “because.” That is the route I would take as a CEO. So let’s rehash now that you supplied the numbers…but first let me reply to Cramer. Cramer, I never said that dumping millions of shares on the market was an option, as a matter of fact, I said that would be stupid at these price levels. And the new cash infusion would probably come at a slight discounted offering to institutions. The bottom line is that the “bottom line” of the company is improving every quarter from here on out. A $6 or $7 stock is much more palatable than a .36 stock you ninny! The market cap won’t change. As for the manipulation…which shares are they going to manipulate? There are now less shares to short after the reverse. Even now the shares are hard to locate.
COS, I was assuming (and hoping) that the newly authorized shares would come into play AFTER the reversal. But we’ll take your scenario:
We now have 8 billion shares which revert to 400 million because of the 1:20 split. Out of these 400 mill, 160 mill are already spoken for, and the remaining 240 mill is what we have to work with to raise new capital. Assuming that the shares are now trading at $7.20, that gives SIRI the potential to raise $1.728 Billion! More than enough to take care of ALL the debt!
But let’s not look at the world through rosy-colored glasses. Let’s look at the situation through the eyes of Dr. Doom (I’m Not Jim Cramer). After the reverse, the stock plummets from $7.20 down to $6.50. SIRI now goes to Dubai, Singapore, Goldman, JP Morgan, Buffet, Gates, Oppenheimer, Oprah, Mickey and Minnie…awh hell, pick whoever you want. They are offering the 240 million shares at a 10% discount of $5.85 which results in a windfall of $1.4 billion! Still more than enough to liquidate the debt. So the net result of my fantasy?
Instead of a penny stock with 4.5 billion potential shares and a billion in debt, we now have a debt-free company trading at marginable price levels with only 400 million shares outstanding! The market cap has not changed and when the company reports 2.5 billion in revenue with only a 400 million share float, where do you think the stock price will end up?
Cos, can you imagine the possibilities IF the share increase comes AFTER the reversal? Imagine we do a reversal in January and then bring in the new 3.5 billion shares a couple of months later?! The company will have flexibility to do whatever the hell it wants, whenever the hell it wants. I’ll leave that new scenario up to you…I have a headache.”
Siriushope…
It looks like Hartlie is coming from a different direction then the rest of us.
Cos..
I copied your letter and added my share count and sent it to SiriusXM. I advise them I would vote no under the current proposal.
Let’s see what they Magic Mel has to say at the Q3 report
vaporgold…. Let’s hope we can get some “positive” attention from leadership at the Q3 reporting. Any shareholder concerned should do the same over the next couple of days. Using a form letter is a way of showing solidarity.
dave….. Gekko13 asked an important question and as I investigated it and applied some assumptions I definitely can see merit to the scenario… Here is an update to the analysis.
As I am someone confused by these recent requests for authority that, on the surface, are in direct contrast to each other and commitments made by Mel K to the common shareholders, I must also look at all sides to the evidence presented.
To make myself clear, I agree with your (sl62) reading of the proxy statement that the 8 bil shares will be filed and available and part of the company’s total shares available but not yet issued, immediately.
A “quick” review:
1. Affirmative vote on increasing shares available for trading to 8 Billion from 4.5 Billion. THESE SHARES ARE IMMEDIATELY AVAILABLE TO THE COMPANY SHOULD THEY WISH TO ISSUE THEM.
2. Affirmative vote on the authorization to execute a Reverse Split minimum 1 for 10 existing, up to, 1 for 50 existing. Authorization is good until Dec. 31, 2009
3. Company announces 1 for 20, RS on Jan. 15, 2008. 8 Billion shares are now 400 million shares. Existing 3.2 Billion shares issued become 160 million shares valued at: .37 x 20 = $7.40/sh. Market Cap is the same as Before Reverse Split, $1.184 Billion.
(caution: These numbers can change up or down depending on how the market perceives the news. In this scenario, I am assuming that management already knows who wants to buy their shares.)
4. Company announces that they are offering to put on the Market for sale at a, say….. 13% discount, 140M shares of Common Stock leaving 100 Million shares authorized but not yet issued. 400M-160M(existing shares)=240M-140M(new offering to raise capital)= 100M (shares authorized but not issued)
5. Company reports 140M shares sold at $6.44/share, which allows them to raise $900M to pay off debt and support operations for 2009.
6. The result is that the company now has 300M shares Outstanding with 400 M shares authorized and has raised $900 M to pay off debt and assist in operations. It now has 3.2 Billion shares outstanding and 4.5 Billion shares authorized.
7. To be complete to the investors out there this also means for every 100 shares you now have 5 shares at market which realistically will initially get shaved by 13% or be worth around $6.44/ share through the 140 M share sale announcement. This value will go up or down depending on how it is received by Wall Street.
I am not a person at this point who wants to invest in HOPE. I do think that with all I have said to the negative about the Proxy Statement requests for authorization, that Gekko13 has asked some questions that require further investigation. The above scenario should be reviewed and tested for accuracy and further inquiry. It is but one scenario.
COS…
I also copied your letter and added my share count and sent it to SiriusXM. I advise them I would vote no under the current proposal.
What happened to all of the talk regarding a shareholder bailout plan for SIRI’s Debt?
Kent…
As far as the debt being serviced by shareholders, I just don’t think it was ever organized.
First you would have to get a count of every shareholder that would pony up $500.00 to $1,000.00 to see if enough shareholders would contribute.
A lot of people have said on many boards they would invest. This is something that Mel and SiriusXM would have to organize and contact each stockholder and request an additional $ 500.00 to see if the money could be raised.
I am sure some would invest, others would not, it would be a numbers game.
It is thinking outside the box, and I don’t know if SiriusXM mangement has any vision at this point, or if they are just in a re-act mode to reverse split and print more shares.
Cos..Gekko 13…
The problem with the outline is that it is just that, a scenario.
Does any stockholder trust Magic Mel and the mangement at SirusXM today?
What is really surprising is that SiriusXM released this without any seperate news releases to the stockholders explaining their intentions.
That alone tells me what Magic Mel thinks of the stockholders. I am not sure if we are even an after thought to him.
I call him Magic Mel because he can make things disappear.
imho
vaporgold
hartlieb remarks:
I thank all of you for your show of support.
This has been a multi-year well orchestrated effort to steal this company away from its shareholders; Sirius Management’s goal has not been to enhance shareholder value, it has been to consolidate all of the SDARS spectrum at any cost as the combined entity now controls more spectrum than all of the FM/AM stations combined in the United States. More so, not just in major populated areas but in every nook and cranny in the nation.
This will become a business model that will be worth multiple billions of dollars. The problem is, unless we do something, we will not be the ones that benefit from this. To date, I have spent roughly 3000 hours researching the company’s failure to comply with their interoperable mandate and all of the misinformation and lack of transparency on this issue.
Above, I have included the 2nd Amended Complaint filed by Jeffrey P Fink initially on behalf of we – the shareholders – ie: “The Class”. With some luck, a lot of work, and approximately $45k spent, I was able to defeat this suit which protected shareholders’ rights. This suit was a sham and set up from the start. The suit was brought forward at arm’s length by the executives of Sirius to reach a settlement which would provide them complete indemnification/insurance for all of their past corrupt acts. In class action cases, the norm is for the plaintiff’s counsel to demand a letter be sent to each shareholder informing them that their rights are at risk and give the shareholders an opportunity to “opt out”. In this case, Sirius refused as they argued before the Court, they could not spend the $1million it would cost them to send this letter to their individual shareholders. Instead, they argued that a one-day ad in the back of the Wallstreet Journal would be sufficient notice. I argued that this in no way could be considered due process or proper notification of the Class in which the Judge finally agreed and was going to force Sirius to send notice via the US Mail. Sirius refused as they were concerned about committing mail fraud under RICO statutes which could have led to five years in prison and a $10K fine for each and every piece of mail sent. Three days after this hearing where they argued they could not afford to spend $1M to properly notify their shareholders, they paid Mr. Karmazin $32M for the year – $1M more than the prior year. That was the end of the line for me.
Attached is another letter memorializing a call from Mr. Fink (lead counsel in the case) in which I was offered $500k to allow the sham suit to go on but at the cost of all other shareholders and class members. I refused. The plaintiff used in this case representing billions of dollars in our interest as shareholders is a professional plaintiff by the name of Mr. Greg Brockwell. He lives in a very upscale neighborhood in Duxbury MA and his home has a current value of $1.3M. He also drives expensive cars and owns other properties as well. One must wonder why someone who proclaims to own 1000 shares of Sirius would contact a law firm in San Diego CA and bring forth such a case.
Mr. Brockwell is a member of a litigation kennel. A group of professional plaintiff’s that own minuscule, if any, shares in thousands of companies so that when opportunity arises the plaintiff is picked from the litigation kennel, has absolutely no involvement in the case, and is secretly paid for his participation in said case which is a felony.
Once I uncovered all of this information, Mr. Fink, Mr. Brockwell and the Robbins Umeda firm ran for the hills, but before doing so, they converted the class action, that was supposed to protect our interest, to an individual action on behalf of Mr. Brockwell and Terri Johnson only. At the time, I did not understand why they were doing this, but it has since been abundantly clear; as Mr. Fink and his law firm has now hired a high profile prominent defense firm that specializes in high risk, high exposure situations. The defense they are attempting is that when they converted the class action to an individual action, we as a class retained all of our rights, so “No Harm, No Foul” despite the fact that I spent nearly 12 months and $45K defeating this case to retain our rights. Where they are mistaken is that this suit, when it received preliminary class status, prevented us from filing a similar suit as it would have been moot and consolidated with their complaint. Therefore, we lost our right to a fully informed vote as well as the right to stop this merger via an injunction which was the main reason the Brockwell complaint was filed.
If you read the Second Amended Complaint, you will see the egregious accusations made against Mr. Karmazin and all other management of Sirius. Mr. Fink states clearly that if this merger is not stopped, at any and all costs, members of the Class will continue to be harmed. Mr. Fink’s fancy footwork by converting the class action to an individual suit was an attempt to protect themselves as they are saying, we as shareholders/members of the class, did not lose anything as we are free to bring an action of our own. Where Mr. Fink is mistaken and incorrect is that his obligation was not to Mr. Brockwell, it was to WE the Class. Mr. Fink owed us a fiduciary duty to protect our interest.
Mr. Fink, in the eleventh hour, threw members of the Class under the bus to reach a settlement that was of no benefit to members of the Class and was going to line his firm, as well as other counsel’s pockets, to the tune of millions of dollars. I believe we not only have recourse against Sirius and its executives but we also have recourse against Mr. Fink and his firm for denying our right to a fully informed vote. lulling us into a sense of complacency , denying us our right to stop this merger via an injunction from the court. He and his firm could be liable for hundreds of millions of dollars in damages to we, the shareholders.
I suggest we bring an action against Mr. Fink, his firm and Mr. Brockwell, as they have already shown they know the tremendous exposure they are now facing as they have hired high profile high dollar counsel to protect their firm; evidence that they understand the risk they face. We all need to bite the bullet and contribute monies to a legal fund as well as make our voices heard via a PR firm and potential civil disobedience at the shareholder meeting and potentially outside Mr. Karmazin’s place of residence: Trump Tower.
Please, all of you that can attend the December 18th shareholder meeting at Sirius Headquarters MUST. Anyone that has friends or relatives that are shareholders need to be contacted. We must have a large turnout in order for the press to take an interest. I will see to it the press, The Wallstreet Journal, and others will be there but I must know that we are going to have a substantial turn out.
I’m coming from Southern California, have booked my flight, $199 to $249, so prices are reasonable if booked early. If any of you can help by contacting institutional owners, that would be a large help. Also, I don’t believe it would hurt if you understand the details and seriousness of Mr. Fink’s (ie: Brockwell’s) breach of fiduciary duties owed us, that you start contacting the firm, asking to speak to Mr. Fink, and express your outrage as to how he sold out the Class members and that we will be bringing forth an orchestrated and combined action against him. I will also give you numbers of members of the press so that it is not just one voice yelling in the wind, but it will be multiple voices, which will give us more credibility.
It has been merely 2 days and we’ve received 16 e-mails, several phone calls, and we are just beginning. Next week, I will have information on how to run (and the cost of running) a PR news wire on Yahoo placed next to the Sirius ticker which will advise shareholders we are commencing an action and seeking plaintiffs (ie: participants).
Any other suggestions as to publications, ads run, or any other ideas are most welcome. Please feel free to call me anytime with questions or give me a number in which I can reach you. I know there are a lot of attachments and a lot to digest, but please spend the time to read them as it will help you to understand the depth of the corruption and the length of the battle I’ve been involved in.
For full disclosure, I am a Sirius Satellite Radio shareholder and hold well over 200K shares purchased at an average price of $4.50. But I can assure everyone, I am more than just a scorned shareholder. This entire situation and the position the shareholders have been placed in is a travesty. What took place in that Manhattan Court Room was criminal and jeopardizes the entire Judicial process (ie: Professional Plaintiffs).
GO TO SIRIUSBUZZ.COM “FORUMS”….. KEEP THE POST AND THREAD ALIVE AND ON TOP BECAUSE MANAGEMENT AND OTHERS FOLLOW THESE SITES CLOSELY. ALSO, THOSE OF YOU THAT POST ON YAHOO, PLEASE SOLICIT OTHER SHAREHOLDERS TO CONTACT ME AT [email protected] TO PROTECT THEIR RIGHTS AND INTERESTS.
Again, thank you for your help.
Michael Hartleib
Thanks Vapor!