Sirius XM Reverse Split Possibilities
With Sirius XM still trading above $1.00, the threat of a reverse split begins to diminish. The company must trade above $1.00 for ten consecutive trading days to regain compliance with NASDAQ listing requirements. Three days are already in the books, and the fourth seems a near certainty with the trading day half over.
Speculation surrounding the potential reverse split has been wild over the past couple of months. From those dreading the possibility to those that want to get the pain over with like pulling off a band-aid, there has been no shortage of opinions on the matter. Right, wrong, or indifferent, most of those opinions are water under the bridge at this point and now everyone is focused on getting the six remaining trading days needed to regain compliance.
Let’s assume for a moment that they do indeed remain over $1.00 and regain compliance. Personally, given the trading action, I believe this is a real possibility. Will that remove the potential for a reverse split? There is a scenario where a reverse split is still possible, but this scenario does not involve the company being forced into the action.
Sirius XM may stave off a forced reverse split, but could potentially still move to perform one anyway. This however would be done in an entirely different set of circumstances. The company would not have the “Reverse Split Gun” to their heads, but rather could do it as a business decision.
Frankly, at any price under $1.50, the company remains in potential danger of getting out of compliance again by a retracement, bad news, or near catastrophe in the economy. Technical traders will be nervous about gaps in the stock price that transpired on the way up. There would still be a level of uncertainty surrounding investment in Sirius XM.
What Sirius XM could do is proactively seek a reverse split to build a cushion well above the $1.00 threshold. As a business decision, this would make the price per share more on level with their peers, and even allow additional institutional investment if the reverse split price were to take the equity share price to above $5.00.
There is a distinct difference between being forced to conduct a reverse split, and doing it of your own accord. Yes, reverse splits have a bad connotation, but typically they are conducted out of survival, not as a business decision. If the company were to sell this potential with the benefits associated with it, it is possible that they could mitigate the negative aspects associated with reverse splits, and be on their way to a less rocky compliance road.
Why should the company consider this option?
- In my opinion, that price cushion could erase a lot of uneasiness on the part of investors.
- The company would be priced with their peers on a per share basis.
- The float number would not be so huge that it is incomprehensible
- Puts technical gaps out of reach on non-compliance levels.
- Could help promote more institutional investment.
- Removes the danger of Q1 numbers reporting from taking a hit on the stock if they are not “up to par” with expectations.
The company seems to be on a stable path. In my opinion they need to prove to the street that they can be a profitable concern quarter after quarter with sub numbers above 18 million with the current subscriber pricing structure. Until this happens, there will always be factions that are uneasy about this equity. By removing any threat of non-compliance, the company can effectively begin to mitigate the unease factor associated with this stock.
Is the company going to do a reverse split anyway? Only time will tell, as this is mere speculation on my part. Should they consider it under the right circumstances? Sure, a smart company considers everything. Should investors fear this potential? Not necessarily. Conducted under the right circumstances, and “marketed” the right way, there are potential benefits. Still, the term “Reverse Split” does make many people shudder under any circumstance. What is your opinion?
Position – Long Sirius XM Radio
My thoughts on this…
You are releasing this article because you are bored and need attention. Just like CNBC, you have nothing to add but fear, and it smells like another attempt to squash the rally! What you should be writing about is the numbers and why SIRI should have a market cap of 10B, at least.
Enough with the old news! What’s your next article? “When is Stern leaving??”
You have interesting thoughts…..baseless and unfounded, but interesting nonetheless.
1. I have written two pieces in the last month, but suddenly need attention….hmmmm
2. The piece is not about fear, it is about speculation on issues the company faces. All is clearly spelled out.
3. Squash a rally? I stated in the article that it was my opinion that Sirius would remain above $1.00 for the 10 days.
4. You want a market cap of $10 billion? Are you serious? What justifies that type of market cap at this point in time? The stock price would have to be more than DOUBLE what it is today and be closer to $3 than $2! There is NOTHING to justify that type of market cap right now.
I am not trying to be a wiseguy here. I like the company and like the product, but I stay grounded in reality.
Stern leaving???? No…he will work out a deal.
I am SOOOO sick of hearing that the company should not be valued at 10 or 12 billion, and only because the sp would have to double???? So fucing what,,,, stocks double all the time, especially ones that were beat into the ground and held there for no reason…. go look at FORD for the past 12 months…..
1. value of hardware in the sky…
2. unparalled relationships with EVERY auto maker
3. unparalled spectrum across the entire country
4. close to $3,000,000,000.00 in yearly revenue
5. growing subs
6. growing revenue
7. 2008 = -$560 million…….. one year later…..2009 = $100 + million,,, and the synergies are just kicking in
That’s just here & now, YES the company should be valued at 10 or 12 billion…… It will be more when some of these other growth ops are revealed…
There’s PLENTY to talk & write about over these next few days other than a reverse FUCKING split…..
sd….
with all due respect to your opinion….
how much are the dozens of Iridium satellites worth? Satellites costy money. They are only authorized for use in satellite radio. Worldspace satellites are sityting in orbit doing NOTHING. The value is in the money the company can bring in.
The time will come that this company can improve to a market cap that you speak of, but it simply is not now.
Spencer,
Honestly, with respect to you too…
I think the value of this company is a very worthwhile conversation,,,, ESPECIALLY considering that it will change often as new devolpments come thru real soon,,,, Throw the sats out of the conversation,,,, and I still disagree with you and say this company is worth $12 bil right now and the sp making a radical change has nothing to do with it.
My bigger grip with your piece is the timing,,,, there’s plenty of pro & con to be said about the r/s…. but a new way to look at it?? RIGHT NOW??
I think there are MANY more important things to discuss for the traders/longs of this stock given what is coming in only 3 days…
a r/s conversation here & now is more of a distraction than anything when we could be discussing real things to be concerned about for Thursday….
Thank You Mr. Osborne for your enlightening opinion, and pardon these guys for seemingly barking up the ‘wrong tree’. It is CLEAR that you have always been a strong proponent of the company, as well as us, the (small) investor.
While I dread the thought of an RS, I also see the jurisprudence of at the very least, contemplating the possibility, timed correctly it may actually work and be a good thing for the company, removing the immediate threat of again losing compliance and freeing us to concentrate on more ‘relevant matters’ such as say…………………………INCREASING Market Cap………..;)
Attacks should better be spent on the likes of harbringers of doom and gloom such as Marketwatchs’ JJaffe, or the Streets.com, Cramer……….
sd-08
Don’t forget No. 8
8. That boat anchor Howard Stern will get a 90% pay cut.
I agree. Why would you write an article about a R/S when there is already enough in the air?
Sleeping giant….
The reverse split is the biggest issue surrounding this equity at the moment. Yes, there are potential extensions if they fail to comply, but that involves another shareholder vote on the issue, etc. The reverse split is the cloud that needs to be dealt with.
I get the feeling that Spencer also thinks a r/s would be a dumb move for siri right now. I think he’s just talking about r/s in a positive way cause everyone else just talks about how horrible it is. It’s good to keep things in perspective.
Tyler your article is interesting, but goes against what Mel has stated 100 times. Also a simple call to IR will reveal to you they do not endorse a r/s, ever, for any reason other than being delisted, which of couse is not an option. A r/s to remove shares isnt in Sirius XM’s plans. Nor do I condone one as a course of action either, volunarily or otherwise. 1.50 to 99 cents for another 30 days to get a delisting letter would go against instututional accumulation that is occuring. Todays buyers do not want a r/s to satify tomorrows buyers. So vanguard, MFC Global, Apollo, Oppenheimer, and Act 11 who just bought 10 million shares, and all the rest of Q1 adds from this run up, I think 1 billion shares may have changed hands already from reet to instutional control. So insiders dont want a r/s for personal reasons (low priced options that double every simple .50 cents, or even 12 cents depending on the insider), for company reasons (easier to remove 1.87 converts by avoiding a r/s), and current stockholders do not want to make buying easier or shorts the ability to have downside.
So the list of who wants one vs. who doesnt is staggeringly on the not want one side. I can see Liberty not wanting one either, as its easier to pump up LCAPA stock value , of which Maffei owns 300k shares bought around $4, by avoiding a r/s. No one argues its easier to get a stock from 5 to 10, then from 1 to 2. So if there is no r/s needed, there will not be one.
Relmor…..
With all due respect, Mel has been referencing being FORCED to do a reverse split. There are many strategies at play. Think about what moved the price to above $1.00, then think about whether that makes the price we currently see stable.
I am not saying that the company will do this, nor that it would happen right away. The company simply needs to consider many options. Being out of NASDAQ compliance is not a good strategy. Being out of the Russel Index is not good either.
I agree. They will be added to the Russel Index again in May. That will be another lift to the price. Im sure the MM’s will want the stock as high as possible when they have to buy back in. If instututions can add here, then those same people buying will not allow a r/s to occur, to keep the funds that have to wait for higher prices out of the loop.
And Mel has stated that the share count isnt an issue, in fact, I have many quotes from him stating this. He stated this on many interviews as well. So from his mouth, who is the CEO , its not an issue. But your right, it is possible Mel is lying, and they could r/s anyway.
Hey Spencer,
You don’t think SIRI “the little engine that could” can hit $2. If you adjust the float back to IPO days it is now roughly 60x larger. 60 x $1.10 gives you a PPS of $66 , only four bucks off the all time high of $70 and back then we had no subs and were not merged. I feel Mel is a magician and will take care of his shareholders. I see a future with HS signed for less $ and a smaller work schedule , also available on all smartphone devices. Hopefully in 5 years we’ll see profitability on a big scale 25-30 million subs , a reduced share count via a buyback effort, and a PPS like Cramer said “It’s a $5.00 stock post merger” I realize , I might be overly optimistic , but I love the product and really believe in Mel Karmazin. I say we hit $2 in 2010. Charles and you provide us SIRI enthusiasts a bunch of great info.
Thanks,
Rob
Rob…..
Going back to IPO days is not appropriate. The landscape has changed inm MANY ways since then.
I’m not in favor of a reverse split. Yet, I understand the thinking here and it has it’s logic.
Before a reverse split, I would like to see the company has reaped all of the benefits of the merger and after the launch of XM’s satellite next year. Furthermore, it shouldn’t be done until we have a more normalized domestic automotive market of 13 to 14 million vehicles per year. I think it will be a long time before we see 16 million/year sales, maybe a decade. However, I’ll be delighted to be wrong about that.
Finally, I do have an ex-boxer’s curiosity. If the free cash for the year exceeds 400 mln. and the pps is still creeping along, I wonder what kind of effect buying back 100 million shares out of the blue would have. It’s like throwing a lead right hand in boxing. When it works, it’s very effective.
SD….
The enterprise value is currently at $10 billion. The reverse split issue is perhaps the most important issue surrounding this company right now. Thursdays call is a virtual non-event. The company has already released the numbers. They are all already known. No surprises. If they give guidance or make a major non-numbers announcement, that would be newsworthy. Otherwise dont look for much out of the call.
We will have to disagree about the market cap.
Thursday’s call a non-event ? I may want to frame these comments…
sxminvestor…..
LOL….they have already given the numbers. There is virtually no surprise in the call. Like I said, unless they announce something outside the quarterly numbers, there wont be much ado about the call
They could have even better cost controls, also very bullish sentiment going forward and announce revenue sharing partnerships. Yes, just the same numbers everyone has heard would not catapult the stock.
Spencer – you don’t think this stock should be at least at 1.25 ?
I think it could be reasonably argued that the equity is fairly valued right now, and there are analysts who will already say this.
The EV of this company is appropriate at this time, as is the current market cap. Plus or minus 7%….sure, but lets not get ahead of ourselves.
It’s what we don’t know is where the $ is made in stocks.
The cost controls are somewhat known. That is why they were able to bank money. On the negative side, I would venture to say that ARPU is not as healthy as it could be. They were very aggressive in retention, which typically means more freebies.
Q1 is typically never a good quarter. Churn will uptick as it typically does. revenues are typically down. That quarterly call is only 6 to 8 weeks away.
As for revenue sharing partnerships…..There is not much left to announce, and satellite radio is still not in a “superior” negotiating relationship with anyone.
You say its what we don’t know that makes the $ in stocks. This is partially true. However, what we don’t know can also cause losses of $, or simply make us tread water. A positive outlook is great, but it is never the only outlook.
What do you think drove this stock from $0.70 to over $1.00? Think hard about that.
Spencer,
These same analysts and others saod the stock was fairly valued at 0.60 in January. This stock should be at least $1.30. Numbers being pre- announced- what is the eps?
Lots of unanswered questions
Spencer-
I think you are a little late to the party with this article, but I guess better late than never.
What a farce. You are so wrong and I will never visit this site again, unless… You write an article saying you misled investors and are sorry. You know nothing!
You backed up your bs with what others say about the stock being priced accordingly. Way to go out on limb! You are a follower, and don’t have a clue. Maybe your next article could be a repeat of thestreet and call for everone to short SIRI. The true market cap is well over 10B, and if you don’t know that – your head is in the sand!!!
Sirius/Xm is in a much better position now then before the merger and it’s popularity is gaining fast! You don’t get it, and will be wrong. I just hope you admit it when you figure out how wrong you really were.
I LOVE MY SIRIUS
the whole market can take a dive
I’M NOT SELLING
Spencer. Spencer, Spencer. The call has meaning. Since I know you really dont believe that, Im not going to humor you further.
I can list 10 reasons the call is important. If you want to hear them , let me know. Ill educate you.
I’m long on Sirius Xm, but Spencer should not be bashed for bringing up some talking points. I think he’s looking at this w/o blinders. As I mentioned before the point he makes that what if the economy tanks is a real possibility. Sirius will be one of the best companies to own if the recovery comes to fruition , but like any other company if the economy should start moving backwards I would think you would want large institutional buyers owning a large % of this stock. Again if economy does move forward Sirius Xm will be one of the biggest winners! But we do have to be honest with ourselves that this economy is still sitting on somewhat thin ice. With what is going on in Washington (both parties) doesn’t give me a war & fuzzy feeling, maybe the rest of you feel we are in good hands? If a r/s split is done from a position of strength and not a matter of survival it should be at least put on the table for disscusion.
Neal, you’re right… but you’re missing the point of why i’m “bashing” him, as you say.. (how challenging someone’s opinion is bashing, i don’t know)….
I appreciate him bringing up talking points,,,, but the r/s “talking point” has ben rehashed 1,000 different ways….
IMO,,, there are MANY more relevant “talking points” for us all to spend time on with what’s in the air with this company…..
Last time I’ll say that,,,,, i’m moving on.. this conversation is a waste of time… I have a cc to study for….
This is going to split, make no mistakes about it and if think it won’t you are just kidding yourselves
Stock is teetering on the dollar mark today but it will close strong with late day trading. Watch and see…
Spencer
Ok, let’s talk something else now.
Do you see any plus in SIRIUS and GARMIN merging ? Both are #1 in their field. Take that theroy one step forward. DirectTV addition to that. All #1 in satellite delivery model. All profitable.
What would be best thing to happen to Sirius this year ?
What would be the worst blow to Sirius that could happen this year ?
I am a long term investor. I am not in love/hate relationship with Sirius stock. I have done profit booking on 50-60% of my holding yesterday. I want to understand from you impact to Siri from other radio models especially through smartphones and tablets which do not require extra cost of internet service that pandora-in-the-car need.
If you notice for whole year 2009, RETAIL SUBSCRIBERS showed 13% drop YoY. OEM showed 9% jump but you know that COST is high with OEM Promotions. Company already cautioned on this cost. Do you really see people going crazy receiving sat radio in their car ? Or they feel bad if they don’t have one ?
They will not split this stock….
Never!! Mel bought millions of shares at 1.37 that’s when I bought!! He has not bailed out on anybody!! He has not sold his shares!! All the other inside traders like David fear and al dara having been selling their shares! I say never when the CEO can be loyal! I think that is when the shareholders,etc…Need to be loyal back to the CEO! I pissed off at the insiders lack of loyalty!!