Reverse Split???
It seems that satellite radio can not let a day pass without speculation or someone reading more into a statement than is really there. Today on CNBC, Mel Karmazin spoke with David Faber in a brief interview that discussed in general terms the closing of the merger, and where the company is headed.
Mel stated many things that people seem to have overlooked because at the end of the interview, Faber inquired as to whether the company would conduct a reverse split. Mel’s statement that the cash flow of the company is how it is run fell on deaf ears. The fact that $2.2 billion in revenues have been generated over the past 12 months, or that aside from a satellite launch in 2009 the company would be in positive territory in 2009 might as well have been stated in a foreign language, because all everyone wants to talk about is a reverse split. Even Motley Fool wrote about it with a headline that was sure to pique some curiosity.
The reason some seem to want a reverse split is so that they can get the stock price to what they feel is a more respectable level. The function of the split does nothing more than bring down the amount of shares by way of increasing the value of those share. If an equity trading at $1.60 were to do a 4 to 1 reverse split, the number of outstanding shares would be divided by 4, and the price multiplied by 4. In theory the event is neutral, but perception also matters. Most reverse splits are not seen as a good thing. It is a move that companies sometimes use as a last resort to make their shares more attractive.
If, and that is a big if, Sirius XM Radio were to consider such a move, now would be about the best time to do it. Some argue that certain institutional buyers and funds can not buy stocks below $5.00. Obviously, in it’s current situation, Sirius XM is below that price. If this were a major concern, then there could be some benefit to using a reverse split to facilitate allowing those institutions to invest. However, if the buying pressure does not exist now, then what makes anyone think that simply getting the price above $5.00 would add an influx of buyers that would be material enough to make the process worth while? From a market cap perspective the reverse split accomplishes nothing.
Mel, when asked if he would entertain the idea of a reverse split gave the only answer he could. “We are considering all options,” and somehow, that statement became the topic du jour. Personally I care less about the reverse split than I do the $400 million in synergies, the $2.2 billion in revenue, the converts due in 2009, the cash flow, the fact that Sirius XM is the second largest revenue generating media company, and the fact that metrics will scale better with the merger.
Talk about reverse splits all you want, but it will get you nowhere fast. Investors should look at the metrics, the guidance, and what the potential of SDARS is rather than worrying about a comment on a stock split that does not change the market cap.
Position: Long Sirius XM.
With all due respect Tyler. I think investors SHOULD BE PETRIFIED. I saw the CNBC interview, if you noticed, he paused at the mention of reverse split. And in an instant I KNEW.
Make no mistake CURRENT SHAREHOLDERS WILL BE SACRIFICED AT THE EXPENSE OF SIRIUS.
Think about it. Mel already threw us under the bus to close this deal by offering up millions of shares to the big boys to short. Causing the share price to plummet to $1.50
Now with massive dilution, the next step is the dreaded REVERSE SPLIT.
ALL YOUR HARD EARNED SHARES WILL BE CUT INTO TINY PIECES.
THE NEXT STEP IS BANKRUPCY….WHERE THOSE FEW SHARES WILL THEN BE WIPED OUT COMPLETELY and Mel will rename the company and start anew.
MAKE NO MISTAKE. Sirius WILL Survive. CONSUMERS STILL BENEFIT. BUT CURRENT SHAREHOLDERS WILL BE SACRiFICED in ORDER TO ENSURE SIRIUS’S SURVIVAL.
MEL IS RUTHLESS AND WILL DO ANYTHING SURVIVE. YES….THIS IS GREAT NEWS FOR CONSUMERS. BUT US SHAREHOLDERS WILL BE THROWN UNDER THE BUS.
CANT YOU SEE WHATS HAPPENING???
EVERYONE IS BLINDED BY THE FACT THAT THE COMPANY WILL BE A POWERHOUSE AND NOT REALIZING THAT IT WILL BE AT THE EXPENSE OF THE SHAREHOLDERS.
WE….THE PEOPLE WHO BUILT THIS COMPANY. WHO FUNDED THIS COMPANY THRU ALL THE TOUGH TIMES WILL BE KILLED EXECUTION STYLE WITH EXTREME PREJUDICE.
PLEASE PLEASE PLEASE…..AFTER ALL THE FALSE PROMISES TO KEEP YOU IN THIS STOCK ONLY TO HAVE THE STOCK HALF AND HALF AGAIN OVER AND OVER…..THIS IS IT. THE NEXT PHASE IS TO PHASE THE REMAINING ShAREHOLDERS OUT COMPLETELY.
PLEASE BELIEVE ME!!!! I AM TRYING TO SAVE YOU FROM LOSING WHAT LITTLE YOU HAVE LEFT!!!
Tyler,
I am going to bring this up on siriusbuzz radio this thursday, but what is the possibility of sirius going bankrupt.
Hey Tyler,
The RS doesn’t concern me as much as the Jim Cramer rumor mill now working overtime to spread lies of a BK!
Please look into this for us.
Thanks Tyler.
Len
Holy crap liam, can you post without putting a whole manifesto down.
Yea, now I have seen everything. The companies had enough money to at least last to the end of 2009, by them selves. Now that the merger is done they are going to go bankrup!!! Come on people get some bloody common sense please, that is even less of a possibility then it was before the merger. They are going to go from not having FCF posittive to having it and now they are going to go bankrupt, please.
Tired of hearing about a reverse split myself … I’m more interested in them making profit and buying back stock.
Bankruptcy … would seem like a bizarre turn of events when they could have added a few extra million to the recent fundraising if they needed it.
Maybe I am jaded. But u learn thru experience. And I have seen this pattern with this stock over and over. Do you blame me for not having faith? For believing anymore? This is like Deja Fucking VU all over again and again and again.
Each time we go lower and lower. And now…we are so low…the next step is bankrupcy and the complete wipeout of current shareholders.
I am sorry. Some people say WOW…we are so LOW! We can’t go lower! BUY BUY BUY!
Excuse me if I can’t drink the kool aid anymore. I see that kind of thinking as INSANITY.
I KNOW. I drank the kook aid many many times. When Howard was hired. GULP!…..then STOCK GOES DOWN.
WHEN MERGER WAS ANNOUNCED….GULP! ……THEN the STOCK GOES DOWN.
WHEN MERGER APPROVED…..GULP!! THEN STOCK GOES FUCKING DOWN.
DO YOU SEE A PATTERN HERE? AND you actually BELIEVE we can’t go lower? Or worse? BANKRUPT??!
Please.
The VERY definitition of insanity is doing the same thing again and again and expecting a different result.
I just can’t BELIEVE ANYMORE. I AM SORRY. And I have taken it upon myself to warn as many people as possible.
Not sure what the controversy is. It was pretty clear Mel doesn’t plan to do a reverse split. After the “we can consider anything” (which I suspect was his way of being polite to Faber) he pretty much slammed it as a stupid idea. “sort of mechanics”. I haven’t found anyone that can’t buy the stock” “Wall Street is smart enough to know the value of it”.
He isn’t doing it.
A 2 to 1 reverse split would double the actual value of each share, but will it really double the share price in the short term. It would make for an even better buying opportunity, but I don’t know if I could stomach having a share price of $2.50 and half the number of shares.
Liam = Plowboy (Matt)
Tyler/Brandon:
Would we have to wait until the end of the 3rd quarter (10Q) to see the financials of the merged entity incorporating all the debt swap, refinancing, stock sales ,etc.
How else could skeptical investors understand their position and what the hell went on here ??
I suppose Sirius 10-Q 2nd quarter is only their #’s seperate from XM since merger did not close till July.
Thanks.
Make no mistake. if there was a 2 for 1 reverse split(most likely it would be more).
But for arguments sake 2 for 1. Ok…you know what would happen. You’d suddenly have HALF the amount of shares…but there would be such a massive sell off and shorting that we’d be back down to $1.50 in a heartbeat.
SO THEN…you’d have HALF the AMOUNT of shares at HALF the value.
I’ve NEVER been a basher of this stock. EVER. I love sirius and was it’s biggest pumper.
But I have such a BAD FEELING from my experience with this stock…and for the first time have a CLEAR view of whats happening…..and i see the COMPLETE WIPE OUT OF CURRENT SHAREHOLDERS.
The company will survive. And I will continue loving my sirius radio. BUT TO LOVE THIS STOCK NOW….TO THINK that it’s a SCREAMING BUY AT THIS PRICE…with ALL the TALK of SYNERGIES….is the KISS OF FUCKING DEATH.
I AM SORRY. I am not short. I am just a long who has been burnt and sees what this company has to do to survive….and as in the past…US SHAREHOLDERS WILL BARE THAT BURDEN.
WE CREATED THESE COMPANIES. WE RISKED OUR MONEY. AND WE HAVE BEEN SLOWLY THROWN TO THE SLAUGHTER EVERY STEP OF THE WAY.
ITS NOT US AGAINST THE FCC ANYMORE. ITS US AGAINST SIRIUS.
IF WE DONT SELL NOW>>>MAKE NO MISTAKE WE ALL WILL BE SLAUGHTERED.
LONG LIVE SIRIUS!???
DO YOU REALLY WANT TO SACRIFICE WHAT LITTLE MONEY YOU HAVE LEFT OUT OF BLIND FAITH?? THIS ISN’T WACO TEXAS! YOU CAN LEAVE THE COMPOUND BEFORE THEY BURN IT DOWN YOU KNOW.
Liam, I don’t know what price you’re in at, but if you don’t need the money right now, I think you would be crazy to sell now. You haven’t lost money until you sell. It IS going to go up. It may go down a little more first, but once they start turning a profit, you will thank yourself for sticking it out. Sirius XM is going to be the phoenix that rises from the ashes of $1.49.
liam you and your NAB buddies LOST!
you can write all the glass half-empty paranoid nonsense you want but the fact remains – the merger happened and it sucks for you guys.
dude! don’t you know that using all caps is what ignorant people do thinking it’s actually going to make their point more true?
I have a lot of sirius stock and im not petrified. I have a high tolerance for risk and I bought the stock knowing that it would be a wild ride.
I am SUPER EXCITED! about the merger and the prospect of what Sirius XM satellite radio will do.
I can’t wait to add Opie and Anthony to my stations!
I cant wait to see what new enhanced services will be available because of combied technology resources!
I’m also excited about the 24 channels of public service that will be available.
I don’t care about the short term stock activity. I bought into a company that has more potential and less regulation than every other media company out there.
your rants are that of a frustrated angry sore loser.
Accept the fact that you didn’t get what you wanted and move your dark cloud to some other place where they want you. good luck with that!
i doubt that liam actually owns stock in sirius – he’s probably a member of the c3sr society representn the “consumer”
nice try buddy!
if you do own stock, do us all a favor and sell that horrible stuff!!!
it’s eaing you alive buddy and you need to free yourself from the stress!!!
Spanyo. I love to believe that. I really would. But based on the last 8 years of this stock…do you really think it will go up?
I got in at $7 and have averaged down to $4.
I was burnt so many times…but NEVER in my wildest dreams did I think there’d be NO pop after the merger.
BUT WORSE THAN THAT…. Mel. OUR Mel….GAVE millions of shares to our enemies TO SHORT!!!
Do you FUCKING BELIEVE THAT???? He said right there with that action that he was going to THROW US TO THE WOLVES. YES…the company will survive. THAT is all that Mel cares about. His action PROVES that he doesn’t care about the shareholders who built this company.
WHAT KIND OF REWARD is that. AFTER BUILDING THIS COMPANY. AFTER STICKING IT OUT THRU THE 19 month merger delay…THIS IS HOW HE REPAYS OUR LOYALTY???
Seriously. How can you even MUSTER hope after that. He DIDNT have to do what he did. He could have ensured there was a pop.
And now we are massively diluted and in debt. WHAT may i ask do you think is next? The reverse split or bankrupcy?
Either way…its us WHO WILL BE SACRIFICED YET AGAIN.
It was easier when we had the FCC to blame. But now I see the real enemy. It’s US!!! Mel has chosen and will continue to choose to sacrifice his greatest resource….his loyal shareholders.
DO you really think great news is going to save the shareholders? How many months of RECORD GROWTH did we have and the stock kept going down???
If the approval of this merger…and no POP…and Mel GIVING our shares to our enemies to SHORT and keep the price down…DOESN’T CONVINCE YOU THAT WE ARE EXPENDABLE TO HIM….THEN YOU BETTER WAKE UP.
I am just an angry long who is about to cash out because there is no hope. I am trying to kill that hope…that like a drug has kept me addicted and unable to SEE for over 3 years now.
But I am no longer asleep. I SEE THE TRUTH.
I WANT TO WARN EVERYONE of what is about to happen.
I am not a NAB!!! OR A SHORT. Please believe me. I am just an average joe. I don’t have many shares. But I lost everything i had.
I am at my fucking ropes end here buddy. don’t accuse me of being a basher. i am a long who was screwed. i hold shares that are worthless. I NEEDED THAT MONEY!
This is rage. This is pain. This is a man who lost everything talking.
Sirius and XM were like two people each trying to make a snowman out of two snowballs with a strong sun trying to melt them.
Now those two people got together and put their two snowballs together and they can now start rolling the ball into a bigger ball. Two people pushing that bigger snowball is going to make a really big ball, much faster.
$4 huh? If you can wait until xmas I think you’ll have a small gift. By then I think you will have some incentive to hold longer. The longer you hold, the more money you will be worth. HOLD or buy more to average down. You will not be sorry!
Mel and Howard brought Infinity stock to $170. It took a lot of time and sweat, but they eventually did it.
You think you are frustrated now, think how you will feel if you sell at $1.65 and then it goes to $5 then $10 and so on…
Per Tyler: “…but perception also matters.”
I couldn’t agree more. Stock splits are all perception. But sometimes – no, make that oftentimes – perception is reality.
Intelligent investors should focus on the size of the pizza, not on how many slices there are (and the resulting per-share price). But that is not what (some) investors focus on.
Just as forward splits give the perception of “more affordable” (when it really isn’t), a reverse split can help build the perception of no-longer-a-nickel-and-dime company.
Too many investors – no, make that traders – focus on the “perceived” cheapness of $1.65/share. Are ten slices at $1.65 cheaper than one slice at $16.50. NO, but some “perceive” those ten slices as cheaper.
If stock splits were meaningless, there wouldn’t be so many forward splits. Companies would simply follow the Warren Buffet approach (ie, never split the stock)
Berkshire Hathaway traded for $8000 per share in 1991. Today, a single share trades for $114,000. Across the spectrum of stock-split-philosophy, Warren is at one extreme (that is, never split and build a shareholder base of long-term investors who don’t react to quarter-to-quarter fluctuations). Is one slice of Warren’s pie at $114,000 worth more than 10,000 slices of Warren’s pie at $11.40 each? NO, but the perception is! Does $114,000 per share keep many potential investors away because it “looks” expensive? YES (unfortunately).
Sirius is currently at the other end of that same spectrum: the low share price is attracting too many inexperienced shareholders who confuse low-share-price with “cheap.” And, unfortunately, it is preventing other (otherwise intelligent) people from investing in Sirius because they interpret the low share price as belonging to some nickel-and-dime company. Neither is healthy for us. The day traders should be exorcised and the potential long-term holders should be courted.
Most companies don’t take Warren’s approach. They take the middle ground. They adjust the number of slices so that the per-share price attracts a healthy mix of investors.
The rational side of me wants to say “BUT SHARE PRICE SHOULDN”T MATTER.” But that is not reality. Share price does matter. Share price ultimately affects the demographics of your shareholder base, which in turn affects the trading patterns, which in turn affects the overall perception of the worthiness of SiriusXM as an investment vehicle.
So yes, I absolutely want Mel to grow the size of the SiriusXM pizza by adding more subs, increasing ARPU, realizing synergies, decreasing debt, etc. But as part of the package of repositioning the company for the future, I’d sure like to see fewer slices for our pizza.
Oftentimes, perception is reality.
Another short-term reason for a reverse split is that many shareholders of XM held that stock on margin. In the 1 for 4.6 exchange for Sirius, the new Sirius stock price is below $2.00 and therefore no margin borrowing is suddenly possible. I suspect a lot of margin calls will have to be satisfied if the reverse split does not cure the problem in the next day or so.
I’ve seen company after company do reverse splits, and they always turn out bad. Especially so for a company that is currently losing money.
True, institutions are more likely to buy companies trading over 5$, but equally true is that stocks trading over $5 can be shorted. And in this market, since Sirius has a dogshit reputation and sentiment, it will be shorted all the way back down.
Forget the retarded reverse split. Focus on getting th merger synergies, getting to cash flow positive, and profitablility. Then, if we get to $4 or 5$, do a 1 for 2 split, and we should be ok.
If we get a 1 for 1 split now, I will sell my whole position… We will be trading at $16… and withing a few months, the shorts will drive us down to 7$ or 8$. Then we will spend the next 2 years trying to regain those loses. It will be a complete waste
Tyler, great article and I agree with looking at the metrics for future results. I also think that the next to quarters are critical to boost investor confidence. I am a firm believer in “Growing The Size of the Pie” and not having a reverse split, they show desperate thinking. And perception, whether our ideal minds like it or not, Is Reality in the investment community.
Unfortunately I also agree with Tull that folks buying on the margin are hoping for some relief from the below 2.00 stock price and the calls that will be coming due or are already. It would be unfortunate if long term investors, in sticking it out through the merger, were force to sell their shares to meet their calls.
Healthy companies buy back stock, and pay down or off debt as cash builds to increase investor equity, which raises the stock price and investor confidence. Another way to increase the “size of the pie”, (Bruce I hope you don’t mind me using your analogy). Given the tremendous dilution of Sirius Xm Radio shares already, Mel needs to build confidence in management’s ability to the execute the operating plan as stated. Any further weakening of investor perception with a reverse spit will be devastating to the company and stock price. Mel being Mel, will not do a reverse stock split after already giving common share stockholders a “Black Eye” for the team.
Really bad post Tyler. I don’t think a reverse split has ever or will ever be considered. I don’t understand why you even addressed it.
Muscle13 – the reason Tyler addressed it is because everybody and their brother won’t stop talking about it.
Tyler – I couldn’t disagree more with your assessment that “if Sirius XM Radio were to consider such a move, now would be about the best time to do it.” Now would be the WORST time to do it. This stock is up against Big Mo – as in big bad momentum. A reverse split will simply set it up to get shorted again…at least in the short term…Plus you got the LIAMS of the world demanding Mel and co. spill all the money-making beans all at once. LIAM, you obviously don’t realize that any good news that Mel reveals this instant will only have partial impact because of the rut this stock’s in. Give it a few weeks. The stock stabilizes, then every nugget of good news gives us a mini-pop and even frivolous buyout rumors start getting treated with some respect
liam
don’t sell yet or you definitely lose everything.
I’m down about 30 grand on this stock but I am not worried a bit about it.
Just listen to mel, read the annual reports, look at where satrad is going.
Mel sid they will be profitable in 2009 – obviously he’s biased, but if thats true, this stock is going to take off.
hang in there – at one time it was above 60$ a share.
I believe it will get back to that eventually.
From what I understand, the share price right now is low because they had to raise capital to cover XM debts.
Once all the shizzle settles – this company is a HUGE force and I really believe it will be very profitable.
if you are a subscriber you have to know that it’s the best thing that ever happened to radio and theres very little chance it will fail. Look at Mel’s track record, everything he touches turns into piles of money.