Sirius Ace in the Hole
Wall Street pundits are betting on the future of Sirius XM with baited breath. They have laid down their chips both for and against Sirius XM being able to pay off their February 09 converts which are due in just a few short weeks.
Fueling the fire, writers from around the web are throwing around such terms as “bankruptcy” and “shareholder wipeout” on an almost daily basis. The problem with this is that these writers are not listening to the facts. Sirius XM has already begun to pay down its debt and this act alone is a sign of a company not looking to go into default.
Mel Karmazin, on numerous occasions, has publicly stated that bankruptcy is not an option and that the remaining debt is already being renegotiated on several fronts. It’s what has still not happened that speaks the loudest as to what the outcome will be. At any time over the course of the last few months, Sirius XM had the option to massively dilute its common shares to raise cash and follow that act up with a large reverse stock split. The fact that this has still not happened leads me to believe that those betting against Sirius XM repaying its debt are betting on the wrong horse.
It should also be noted that the Sirius XM (SIRIW) warrants, which have a strike price of 3.18, are trading up 1600% above their .05 lows. Sirius XM has an ace up its sleeve and it is yet to be played.
This article is complete and utter horse hockey.
Sirius is in debt up to their eyeballs and the are a now a penny stock that lost over 95% of it’s value in 6 months.
Mel may have his back up against the wall but to believe that they won’t go bankrupt is delusional.
All I know is that I am out over 6k and all I can do is hold on to it and see where it goes.
Personally, I would be very surprised if SIRI filed for BK, but we shall see very soon.
John/163888 . . your post above is well-stated (I tried to type up there Charles but no “reply” button). If Brandon’s article had been written in the style of your post . . . as a well-reasoned opinion piece supported by a series facts, with caveats where appropriate . . . I would have had no objection.
Your argument for no bankruptcy is persuasive . . I have played-out that scenario in my mind many times. The one place I get hung-up is as to COH. At last report it was 360 before any burn during Q4. I do not think they will be willing to further deplete cash reserves based on Mel’s experience at CBS when he had to “go into his pocket” to make payroll . . Q4 is an unknown at this point.
My guess is that Goldman Sachs will get what Goldman Sachs wants . . . which is more favorable terms on a new series of converts (I am guessing their position is about $150mm). The residual, 26 and change, will be taken-out via debt for equity.
Then all eyes turn to March 1st . . . not May! We will then be treated to the unveiling of the Evercore roadmap. Perhaps the May debt holders/bank will extend/renew at reasonable terms, or else! That leaves the December converts with authorized but unissued shares still in the arsenal and ready to do piece-meal debt-4-equity exchanges (read: dilution), presumably at a higher share price once Feb and May debt are adequately addressed (but . . . the street may not like rolling the earlier debt – ie kicking the can down the road – unless the revenue side is really strong) . . . some intermediate guidance here would be helpful. If the street doesn’t like the Evercore plan, I worry about private equity taking us out on the cheap . . . . better of course than bankruptcy but still leaving pre-merger investors unlikely to be made whole . . . even at enterprise value.
Still though, there are flies in the ointment that should not be ignored, including recent changes in the competitive landscape. Further investment or new investment at this point would have to be viewed as a calculated gamble, not a sure bet. The real possibility of bankruptcy, whatever weight you choose to give it, does have to be factored-in to those permutations.
And last I checked . . . a gun-to-the-head trumps an ace in the hole everytime! (I saw that on the History Channel John, or was it Deadwood?)
Sirius Roadkill, I think that is because there was no more room, if you notice it got shorter with each post. If it let you, you would have had a post 2″ wide by 3′-0″ long.
Now dont get me wrong here, I am not saying it is totally out of the question, but that it is not likely. I also dont think Mel is wanting to give GS what it wants. I think he was and most likely is still pissed at them. Also look at it this way if he was going to do that, why not have done it before now and skip all of this pain. I believe as I said before if he wanted a easy way out he could have given GS what it wanted on the converts. Then he would have also not only have taken out the remaining Feb. converts with that, but lets face it Weinkies would not have bashed it because GS would have taken care of the rest of any financing that Mel could not do himself (basically act as a safty net) analyst would have known this along with GS and the stock would have soared. There by making GS a lot of money on new converts and the shares that they had and are buying.
I get My confedence in Mel from reading about him. There were a few articles out a little while ago. One was interviews with people that worked with him and now compete against him. You could almost hear it in the words that they were shiting their pants that they are now going to have to compete against him. I remember one comment from that article that said Mel is the type of person that if you dont play his way then he well take his toys and leave.(that can be take in a good way or a bad why) One thing is clear from that kind of a comment you might be able to see how he might be handeling GS. The next comment I remember is he treats 20 million like it was 20 dollars, basically from the article you get that Mel is frugal, and that he doesn’t want to lose 20 dollars any more then he wants to lose 20 million. Now from that I get that when he has sunken every dollar he has ever made from SIRI, plus some of his own money, he will not choose bankruptcy until it is absolutely the last option. Lets not for get he has put alot of his time and money into this company, he is not going to just let it go down the drain.
well said
I dont know was it the marksmanship show? I missed that one.
It was the episode where Wild Bill Hickok gets shot at the poker table . . . I think that was Season 1 . . . check this out:
“On 2nd August, 1876, Wild Bill Hickok was playing cards in Deadwood. Jack McCall, seeking revenge for the death of his brother, shot Hickok in the back of the head. At the time of his death, Hickok was holding a pair of black aces and a pair of eights, and this became known as “A Dead Man’s Hand.”
Interesting stuff, huh? Damn I miss that show!
>>>Sirius Roadkill said:
“Shame on you!! It IS a big deal to include that type of inaccuracy in a published news story in which the author purports to have some level of expertise.”
Dude, I wasn’t talking about the BK discussion in his post or any of his other conclusions — my “no biggie” statement was his reference to the conversion price of the SIRIW warrants… that was it. I wasn’t talking about his conclusions or his other statements of what he said were facts.
Don’t read too much into postings by anonymous posters… it was a simple post by me pointing out a simple correction. It surely didn’t mean that I thought the rest of his post was “no big deal”… I thought I made it clear that I was just clearing up the factual details of what each warrant was.
Sometimes a duck, is just a duck… if you know what I mean.
——-
homer, I most definitely hear ya on that . . . .
Perhaps I should have been clearer . . . I was in fact actually referring only to your comment about the warrants (or at least that was my intent).
I did not interpret your remarks as passing judgment about the bankruptcy issue . . . I know from following your past posts that you typically stick to the math and or facts . . . as you did here.
I do feel, however, that you did give him a pass on the warrants by saying “no biggie.” (as relates only to the warrants).
The warrants-issue involved basic, verifiable, facts which were either incorrectly reported, incorrectly stated or incorrectly interpreted by the author in such a substantial way that a free-pass is not justified.
So that’s all. I knew you had not taken a position on the balance of the article . . . and I know it’s not your style to hammer anyone . . . and I respect that and I respect the idea of allowing someone to save face.
Again, I just feel that the author needed to be called-out on what I consider a significant error (jmo) . . . it has the potential to be terribly misleading for those who may be less informed about the current state of affairs.
I hope I have written this post more clearly than the prior.
Sorry for any confusion . . .
Fair enough, no prob… that was well explained. And yes, I will typically give people an opportunity to save face — because I dont want to come off as arrogant and pompous.
But as was pointed out to me a long time ago, message boards and emails can be dangerous for communicating… because it removes the human aspect of the communication. Where you can look into a persons eyes and see their facial expression — and know where they were going. But electronically? It’s so easy to miscommunicate — or misunderstand what a person was saying; it removes a key element of communication.
—-
So should I average down one last time and keep repeating my losses?!?. When does a stock stop becoming a speculative gamble and more a sound investment? Well I guess we’ll all find out in the coming days. This is just another speculative article but thanks anyway. Mel was right, I’m not that “sophisticated” but I do like satellite radio. Boy, am I paying for it! GTLA.
Just in case anyone is getting their hopes up, allow me to burst your bubble.
This is a direct quote from the Sirius XM 10-Q form:
“An inability to access additional sources of liquidity to fund our cash needs in ‘09 or thereafter or to refinance or otherwise fund the repayment of our maturing debt instruments could adversely affect our growth, our financial condition, our results of operations, and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws, which could materially adversely impact our ability to operate our business and to make payments under our debt instruments.”
Granted this statement was made a few months back but NOTHING has really changed for SiriusXM on the debt/credit front.
Tim did you even bother to read the first comment on this article. It covers what you said, the fact is most companies have that kind of statement at the end of their reports. I think you call it a disclaimer. It helps in minimizing class action law suits.
Tim,
Why not just publish any company’s “Risk Factors Section” of their Prospectus, 10Q or 10K. Like going for surgery or taking a new prescription, its called Informed Consent and Full Disclosure before going under the knife or buying a share of a company’s stock. It is as John said above, part of the company’s Risk Management process and every investor’s responsibility to read it as part their own due diligence.
So to your point that the statement was made a few months back. The statement has been made ever few months as part of its 10Q, and has been for years. Nothing new here….
Tim
Have you checked out other companies 10-Q’s. Most of them have a statement similar to the one in SIRI’s. As Cos1000 and john stated above, any company can file BK at anytime. Stop being an antagonistic jerk.
sorry did not read your comment before I wrote mine.
If you don’t like my posts, don’t read them.
What makes it difficult is that your posts sight boiler plate language from company documents as though it is news. It is the evidence that you give to “burst the bubble” of anyone with a more positive view on the company and stock’s price potential that leaves a reader of your post feeling flat to negative on your view. I still read them because I am always looking for useful insight regarding the puzzle that is this company….
Everyone is contributing in one way or another……is this not the greatest? Mel, you and your management team are pulling off the stuff you meant to do. Eventhough Wall Street Bulls have been overcome by those that profit from doom and gloom, you showed them with your persistant programming gaming that never loses a beat and a pie in the sky gleam. We are almost at the turning point and Mel is going to pull this off and be the darling of the cover story that he and everyone at SXM is worthy of. The antenna (never spelled it before) is nearly gone guys……get ready for the next Benjamin future trick, SAT radio is here to stay. Long term, there will be so many contributing factors that SAT radio will eventually be filled with commercial channels and they will be filled with great things that you can literally print out from coupons on your dash board or on your home printer. SXM is a company who really has a path to stardom and when you close your eyes, 10 years passes, and wholly molly, you will not recognize the bright things before you. Watch out people!!!!!!!!
Here is the rest of the unreported info regarding Barclays analyst published on Barron
http://online.barrons.com/arti.....35207.html
HIS TARGET FOR SIRI IS $1.80
still sirius,
Tim has always been a jerk and due to his hidden agenda he will remain one.
SIRIUS XM Stockholder,
You don’t know me, have never met me but you feel qualified to state that I have always been a jerk?
What is my hidden agenda, Good Customer Value and Service?
Grow Up.