Show Me, Don’t Tell Me – A Response
One of the positive aspects of bringing on another writer to the site is that additional opinions can be published, a dynamic between writers can develop, and readers can see additional perspectives. Brandon Matthews recently published a piece titled, “SiriusXM Show Me, Don’t Tell Me” in which he expressed opinions that Sirius XM Radio needs to show results not simply speak of them. Brandon expressed an opinion that he would like to see a stock buyback program in the near term. I disagree.
While a stock buyback program would be nice, now is not the time to implement it. Yes, $400,000,000 in synergies in the first year will go a long way, but that money needs to be reinvested into the company. There is a satellite being launched in 2009, that needs to be paid for. There is debt that needs to either be paid down or refinanced at better rates when the financial markets improve. Sirius XM Radio needs synergies to improve the financials to a point where they can negotiate better deals throughout their business, and buying back $200,000,000 in stock would be a short term sizzle in the company, but longer term would not be material. One quarter later, the financials would have $200,000,000 less dollars, and an outstanding share count that is still very substantial.
A stock buyback program needs to come from positive free cash flow. It needs to come from a company that is making money. Until Sirius XM Radio gets to that point they need to conserve their capital, and invest it into programs that deliver better cash flow metrics.
Mel Karmazin has outlined that he wants to be free cash flow positive in 2009. He has outlined a goal of $400,000,000 in synergies in the first year of the merger. Each and every move by this company needs to be weighed against these goals. Sure, these will take longer to get to a “Show Me” stage, but additional clarity will come with each passing quarter, and investors who follow closely will be able to see whether the company is on the right track.
Yes, I agree that a share buyback program would be beneficial, but I think now is too early. The program would be far more powerful if the monies to buy back shares were coming from a company in a profitable position.
In my opinion, the near term “Show Me” needs to come on the financial metrics and from demonstrating synergies of the merger. I think that Brandon and I have similar long term outlooks on SDARS, but have differing opinions on the near term objectives and strategies. The debate however is healthy.
Position – Long Sirius XM
While I agree that a stock buyback would be premature at this point, I think it would send a strong message if Mel, Gary or other execs/directors were to buy some personal shares.
Any cash flow that Sirius generates should be used to pay down debt. The interest payments on the debt must be hundreds of millions of dollars a year. As a bondholder, I appreciate the interest payment I received yesterday but as a shareholder I realize the cost. I am using the interest payment to buy more shares at these bargain basement prices.
Brandon Matthews has been an excellent addition to the website. I also look forward to the radio program. Unfortunately, I don’t get to listen to it live but enjoy it later.
Sirius will have opportunities down the road to buy. Even when they are healthier, the stock and company will still have bashing articles like:
“Sirius’ profits up… but for how long?”
Sirius is not a quick buck stock right now. It IS a small snowball that is getting closer to the top of snow covered mountain. Once it makes it to the top and starts rolling down…look out.
I say buy or hold. Remember, history repeats itself. They bashed Mel and Stern when they were with Infinity. That stock didn’t exactly end on a low note.
Quick poll….who is right? Tyler or Brandon?
https://siriusbuzz.com/forum/showthread.php?t=614
MAYBE YOU SHOULD INCLUDE THE COPORATE JIHADIST JIM CRAMER IN THE BUY BACK…..SEND PART OF THE MONEY TO AMERITRADE TO RETIRE HIS ASS…..AND OH BY THE WAY….WE ARE GOING TO SUE THIS PIECE OF SHIT!
I agree with Tyler that Sirius needs to focus on decreasing the debt as that is the only thing that will help this stock price in the near future. The current price is pathetic and I am not sure how long I can hold..
I disagree with the buyback idea, however, I agree that Mel should be buying shares at this level to show company confidence.
Jim Cramer is THE REASON why the bond deal
got priced APPROX .40 cents lower per share.
The timing of his rant created the perfect
storm to drive the shareprice down and
cause the selloff.
How can SIRIUS not, on the behalf of shareholders, and the company not sue CRAMER
and CNBC ??????
That comment from the other john at 1:36 PM did not come from me. I also cant believe such language is used here, LOL.
crfceo, If you have read the debate, I was having with Charles a poll does not make somebody right the facts do. It so happens Tyler has the facts on his side. Come on a company losing money left and right, is going to buy shares back, that makes sense right. The street would see right through that scam.
spanyo, SiriusInvestor, What are we a communist state were the majority can tell a person how to spent his money. I do think you are right to a certain point though. If Mel has that much confedence in SIRI XM then why is he not buying at this price. Maybe it is because most of his pay comes in the form of company stock already. You ever heard of an old saying, “dont put all your eggs in one basket”.
Tyler, you are right, it would be foolish to buy back stock with money the company A.) needs for other things, and B.) doesn’t really have anyway.
What we are seeing now is people that are mad. Many of them got in for the merger to make a quick buck and now found out there is no pop and no quick buck to be had. I have to say as a true long, I always expected to be here with most of my shares for long after the merger. So I am not worried were the price gos for now. As for the promises of FCF positive being made things changed. I believe if the merger was never anounced SIRI at least would have been there this year for the whole year. They already had 1/2 of 2007 FCF positive. When I look at this company I look at a 3 to 5 year time frame. Something I think these short term longs should start getting used to. I got news for them the next 6 months is not going to be easy ether. They will have low Net adds in the 3rd quarter as they usaually do. Even the usaully good and improving 3rd quarter metrics will not be that good this time due to the merger cost now being added in (severance, and ect.). The street knows this will be why, but something tells me they will put a negitive spin on it. Until the 4th quarter report is out we will not see any factual good news (al la cart out for the first full quarter). Then we get out of this dumper not just because of the 4th quarter but because of the interoperable radios will be coming out. Everyone knows that will be the real driver of net additions and ARPU (I hope it is sooner, but who knows).
Sirius has to refinance $1.2 billion in debt next. They’ve said they would be CF positive excluding satellite launch costs. Meaning they will not be CF positive after those costs.
Where does anyone believe Sirius would get the money to do a stock buyback? Its not a question of whether is a good idea or not. Its impossible.
I really would feel more comfortable holding this stock if the other investors would think through some of their comments before sharing them with the rest of us.
Who holds onto stocks for the long term these days? If you want a good long term investment, invest is gold or bonds. Sirius needs to act quickly on eliminating the debt or they won’t see their stock do anyting for a long time. You also should never assume a stock will go up in a 3-5 timeframe just because of the time factor..
I thin there should be more titles with Rush songs in them
Mel said he expects next years notes to convert because the stock will be higher 🙂 otherwise they’ll try to roll it over into a new convert.
As a Long investor the only thing at this point that worries me is all this talk of bankruptcy. Does anyone think that BK or reorganinzation chapter 11 could be in the cards or is out of the question. Would BK wash out investors and give Siri a fresh start? This really scares the crap out of me. Unfortunately I’m one of the Idiots that went gung ho on Mel’s accomplishments and thought everything this guy touched turns to gold. Boy was I wrong.
Terrymr….
I agree and try to work Rush into pieces every now and then. Recently, I saw another publication do the same…..Perhaps they read here
Hey if Mel liked the stock at $6 when he bought a million shares, he has to love it at $1.46. He now has a chance to average down. The question is does he have the balls to buy more from his own pocket.
Sirius Shareholder, I will tell you who thinks 3 to 5 years in the future of a stock they hold!!!!! THE SMART PEOPLE. We are not pissed about there being no pop. We are just happy that the merger mess is over with. So now they can get back to busines of real big growth. I once again say that because 2 million net subs was fine (can anybody believe I just said that, only 2 million net adds was fine, for just SIRI by the way.), when they had their hands tied and could not get a new product out, did not really advertise, and could not do anything about confusion about the merger.
Terrymr
The Sirius convertible (March 2009) has a conversion price of $4.41;
The XM convertible (December 2009) has an adjusted conversion price of $10.86.
As much as I’d like to see the stock price up that high, I don’t see it. That debt will have to be refinanced.
The remaining amount… the $350 million credit facility, can have its date extended, as it is a bank credit facility. There are no bond holders to deal with… just a couple of banks.
P.S. — I’ve had that song in my head all day…
—–
Tyler, you mean the motley fool article with Tom Sawyer scattered through it ?
Homer, Yeah I agree it would be nice to get the price that high – but it’d need something really big to drive it past the convert price anyway – right now it doesn’t seem likely.
Hold off on all bonuses until Sirius-XM becomes profitable. Too many six figure bonuses were being handed out for simply doing one’s assigned task (like breathing)versus going the extra mile.