Sirius XM And Manipulation
Sirius XM has a lot of passionate fans of the service and a lot of passionate investors. One common theme among many investors is that Sirius XM is a heavily manipulated stock. WAKE UP PEOPLE! Why is it that I hear everyone scream manipulation when the the stock goes down, but never hear it talked about when the equity goes up? Why is it that people scream manipulation when a firm writes something negative about Sirius XM, but never when a pumping overly positive article is published? Why is it that today Sirius XM announced wonderful news about subscribers, but investors fail to consider the other side of the coin…THE COST TO GAIN THOSE SUBSCRIBERS?
The fact of the matter is that manipulation on a smaller scale happens on all equities. Companies put out positive information all of the time in press releases. Every company out there also has critics that will be negative. Many Sirius XM investors seem to think that there is some wide ranging conspiracy against Sirius XM to take down the company. The fact of the matter is that Sirius XM is a popular stock with high liquidity. Do investors actually think that the announcement of 583,000 subscribers should boost the stock by 20% or more? The news is positive, but adding $1 billion to the market cap because subs are up by 500,000 seems like a bit of a stretch….or better yet a massive stretch. If these 500,000 subs are worth a billion, why isn’t the company valued at $38 billion for the 19 million that already exist? The problem here is not the everyday “manipulation” tug-of-war…It is overzealous investors who don’t stop to think about things more deeply. They get over excited on positive news and positive articles only to be disappointed time and time again. They seek someone to blame, and cry foul due to “manipulation”! If you feel that SIRI or the market manipulation is so bad, get out of the equity and get out of the market.
We all saw the good news released by Sirius XM today. It was indeed good news and should be celebrated. How many of you that cry manipulation considered the other news that was released today? The company added about 2,014,982 gross subscribers in the quarter. Last quarter the company added 1,720,848 gross subscribers. With a subscriber acquisition cost of $60, those 300,000 additional subscribers come at a cost of nearly $20,000,000. This cost will carry a negative impact on EBITDA. Last quarter EBITDA was $158,000,000. Don’t look for Sirius XM to match that this quarter. The company warned that SAC would increase last quarter, but it seems that most simply choose to ignore this fact. Smart investors embrace today’s news for the positive it represented, yet were tempered that news enough to realize that growth costs money. Notice that Sirius XM did not increase EBITDA guidance today despite the fact that subscriber growth was increased. Subscriber growth is good in the longer term, but it presents present day costs that must also be considered.
People see the boost in subs and guidance as a reason analysts should boost short term price targets. People feel upgrades are deserved because the company reported a subscriber number that blew away what analysts were expecting. HINT FOLKS….Those subscribers cost money and analysts are basing their models not on subscriber growth, but instead the balance sheet. Current EBITDA guidance remains at $550,000,000 for 2010. Q1 delivered about $158,000,000. That leaves $392,000,000 for the balance of the year, or about $130,000,000 per quarter. The company can top that number, but their caution in raising guidance hinges on the OEM channel. Think of it this way. Each gross addition costs $60. Adding subs is great, but it is great for the future, not the present. Thus, why should the stock jump up in a huge way on this news? The move up was likely what it should have been. In the end I would rather see a slow and steady move up than the roller coaster of emotion that many SIRI investors seem to be on and love to complain about.
Rather than looking for the latest conspiracy investors should focus more on the metrics and getting deeper into them. If the company is hitting on all cylinders there is less of a tug-of-war that can happen. Stop looking for “signal trades” on level two and break out a calculator to crunch real numbers. Stop blaming The Street.com for the negative piece and look at how Sirius XM is when compared to the overall markets. If you stop and look at this you will see there is no massive conspiracy involving Jim Cramer, Motley Fool, CNBC, MSNBC, SIRI analysts, auto analysts and some clearing house in Cincinnati.
Yes, the markets are manipulated some scale. People talk up stocks and people talk down stocks. It happens every day to every equity. I fully understand that there are cases that the manipulation goes beyond the norm. There are plenty of famous example of this happening. Yes, I understand that naked shorts are a problem. Yes, I understand that the average retail investor is at a disadvantage. I get all of this, and believe corrections need to be made. What I do not understand is the number of people invested into SIRI that toss around the manipulation word every day, and stayt in the market.
SIRI was up 6% today on good subscriber news. Why anyone would expect a move more than 10% is beyond me. Especially so quickly after considering the modest move the equity made on the Russell reconstitution. I have said for a long time that this equity has people on both sides than can point out reasonable arguments to go long or short.
I am sure that this article will frustrate some. It is my hope that it gets more people to think a little deeper and stop looking for someone to blame. Enthusiasm is good, but it needs to be grounded with good solid thinking, not following some mystical signal trade on level 2 or an article published that sees the other side of an argument.
Position – Long Sirius XM
Spencer
Good stuff! Alot of passion in this one! Don’t let the village idiots run the asylum! Keep them coming! Continue to call them as you see them!
Nice article Spencer , I bought an extra 100k shares for the “Russell Run” at .97 saw how the week was going and couldn’t believe that we would have a great run without a good run up. So I sold 1000 covered call contracts at .09 before the Russell and covered them at .02 after the drop last week . Now I have a profit from them and the shares . Sirius is not a make a bunch of money in the next week or two proposition , it will take time. Want to take a chance on making a quick buck check out NBIX and DCTH both have treatments or drugs that are in stage two or three with very promising results in the books already. But Sirius will take time , buy it forget about it and wake me up in about two years and then check the stock price !
Incredible call on DCTH. Wish I would’ve seen this post on Wed night. I was alerted to the stock on Fri AM on a candlestick trade, but bought another instead. 30% later…I’m kicking myself on that one. Nice work.
Thanks for calling out all those morons and newbies at the ‘other’ dedicated Sirius websites. This site and you are most credible. Nice job on the writing.
Funny,good sales numbers are a double edged sword for Sirius Xm. The sales revenue goes up but so do the sac costs. That’s another reason to have lower tiered programming by offering this type of format to 20 MILLION IDLE RADIOS. No sac cost and more revenue and besides putting more pressure on your competition your making your product a more understood and recognized iconic brand. I still think even a free limited format w/ sponsorship would bring Sirius Xm more in to focus with more potential consumers. You’ll be bringing in the under 25 crowd and creating brand loyalty so when they are moving up the food chain they will move up to a higher tier of sat. radio. I believe it’s coming it’s just a matter of when.
Probably speaking for other investors as well, we finally get that big upside surprise and it was a dud considering we were touching 1.10 at the Russell rebalance and 1.25 in April 1Q CC. All we ever hear is that all the numbers we get from Sirius are predictable and they hit a home run here and the focus goes to the cost being a drag. I don’t believe they would grow in an inefficient manner, so I think the news is much better than they are getting credit for.
excellent point and I agree
Spencer,
Yes manipulation happens with all equities up and down but surely you are smart enough to acknowledge this goes way beyond the norm. This is down right crooked. There is no way in the world this stock should be a dollar. You are entiltled to your opinion but I atleast give you credit for being smarter then this.
Stocks go up on manipulation too. I agree with that and have argued about that on the upside.
I say just have the guts to call a spade a spade.
Spencer,
Several companies today were up more then 6% on no news. A 275 point day will do that. With the news today, siri should be higher. Even Bank(RBC anayst) had his numbers being represented at 500k subs for the year. All stocks trade on forward earnings. The bottomline is siri is being manipulated. The writing is on the wall. Just have the guts and balls to admit it.
Why continue to sugar coat it?
Steve….
Surgar Coat what? What value do you place on this company today? Do you really think that a pop over 10% would be justified on this news? A pop was deserved, yes. A pop above 10% would be taking things too far.
The avearge price target is 25% higher than where we sit today (the average is $1.25). If the stock is 25% below the price target, why do people expect upgrades? The equity still has not gotten within striking distance of the current target!
You state, “Stocks trade on forward earnings” – current estimates are for the company to make a penny a share in 2010. Leta say they make 3 cents, or even 4 cents for the year. Do you really think that a massive increase in stock price is justified on those earnings?
You say , “There is no way this stock should be a dollar” What price do you feel it should be? Fully diluted there are 8 billion shares out there. The company is projected to grow, but not at an exponential rate.
The $1.25 estimates are reasonable and prudent at this juncture. Look at the multiple this stock is already trading at! How much of a multiple would you apply?
Sorry folks but I have been long Siri a very long time . Have taken my lumps and made some money . This IMHO will take years to be a big gainer . The big gain was buying at .10 till it hit a buck.From here on in it will be way more incremental . If you don’t have the stomach or patience to wait it out then best get into something else . They are simply not adding subs at a rate that will impact their bottom line enough with the amount of outstanding shares there are to drive the PPS up like most expect (or want) to see . What you will get from Siri IMHO is steady growth and gains . But you will not see an explosion that you can go from rags to riches in a years time. You need to forget about this investment for a few years and then you will see that you made some nice money ! But forget the pie in the sky BS if you missed it in the teens last year you need to have patience .
I disagree because it is the hangover of the next debt wall that is holding the stock back from 1.50 – 1.75 range in the next 6 months. I think if they pay down some debt with cash and do a new bond offering to crack the back of the 2013 debt & push to 2020, you will see a big, swift move. Moodys, SP upgrades may be due soon. This stock may break out real soon and then get to and hold above 1.20.
And that money to make a substantial dept payment will come from were exactly ? Surely you aren’t thinking that the 100 or 200 million in free cash flow that they will clear this year will accomplish that , even if they could use every penny they took in for it which they can’t. And as far as another bond offering while that would be a good idea to break up that huge debt wall looming it is only pushing it out further . The only way they make that work to pump PPS is if they can MUCH better rates than they have now . Believe me i hope you are right besides the 100,000 shares that i bought for the Russell run up that I am still holding , i have another 400,000 Sirius reasons that you are correct . I just don’t see it bro ! IMHO it will take time , it will happen , we will have to be patient .
The cost of subscribers,,,,the cost is in the price of the subscriber,,,that is the point of getting business.
How else are we going to make money.
If the company was losing money when new subscribers come in what would be the point to stay in business.
We are dealing here with Catch 22. Analysts unanimously keep claiming that siri’s growth slowed down dramatically and this is why they are very cautious in their modeling. The company reports Q2 subscriber growth that beats expectations as much as SIX times, the news however is practically overlooked because of the SAC. (do not forget that the stock was first suppressed under $1 on blatant rumors only and let us use a correct benchmark) Bullshit! Only a fool can close his eyes on the facts! And the facts are such that we need to pay attention to the history of both companies when their combined valuation was as high as over over $22B, with over $9B for sirius and and over $13B for XM. We need to ask a simple honest question of ourselves. Is the combined company a better business than the two individual ones? One has to be an outright idiot to say “no”. The combined company is ten times better than what they used to be individually. It would be a waste of time to list all those benefits of combined sirius xm for an educated follower of the company. This is why I keep asking what true valuation of the company is? It is not true that on a fully diluted basis there are 8B shares because 3.9B + 2.5B (liberty) = 6.4B. We can add options and converts (if any are materialized) and the worst case would be 7B. Is one billion shares change? It is absolutely obvious that the market has long memory and will keep punishing siri for some more time for market expectations smashed by siri bankruptcy and free 40% to siri savior. However, we cannot ignore this phenomenal addition of almost 600K new subs. This is a clear indication that someone is profoundly wrong in their siri modeling and valuations but it is definitely not siri and not us. I keep saying that the company will be not just profitable but the most profitable in radio business and one of the most profitable in high tech business within the next two to three years. Why? Because again their competition is so soft and the market is still so virgin that any business would salivate over this. I still keep saying that valuing siri stock at a dollar is an insult to any reason because of what they are now and their immediate future. What I am asking for is a balanced and reasonable approach. Is siri stock worth $5.00 today? Of course not. But today’s price at $1.5 or even more is absolutely justified. I just wonder what these gurus are going to say if siri reproduces in Q3 its Q2 results with solid fundamentals and the company would be on a pace of adding 2M subs in 12 months. They will come up with another bs like Howard is leaving and here is siri’s doomsday. We have heard this zillion times before and enough is enough. This never ends.
It is so naive to say that the company is not getting very special attention of manipulators. It certainly is. However, the only way you can fight such manipulators is by consistently beating them with your RESULTS. And this is exactly what Mel and Co are doing. And what are we doing? We are just talking. So, let us talk reasonably and believe in what we see rather than what we hear. Because they want the heard to believe in what they hear.
Thank god the company didn’t add 1 million or more subscribers in Q2. The stock would have collapsed back down to .05 because of the subscriber aquisition costs. Worse yet, if they had added 2 million subscribers, they would probably have to file for bankruptcy.
I get your point about taking a short term hit on the SAC costs, but after the quarter is reported, the company moves forward with more revenue and profit from those subs. I’d rather have more subs now than more subs later. The street.com puts out an article saying that Sirius/XM growth is only up to 1/2 speed. They say almost 600k subs is not good enough. Spencer says that it’s too many to add at once because of the added SAC. The most important thing to me is that this company has shown that is able to grow in this economy. Any company that has grown at all in the past couple of years should be commended.
Wait a minute here….I did not say that it is too many to add at once.what I said is that analyst models just got hit With news that will make them adjust their models and account for the costs. Mote subs is good. Expectations now have to change. That will take some time. Until analysts see how this impacts the balance sheet we will not really know what this means to the bottom line
Spencer,
I respect that you report the facts. I do appreciate your honesty and integrity but even you must know that SIRI being attacked is way overdone. This is all about control and money.
The stock market moves on emotions and momentum. No one in their right mind would short siri right now unless it is being controlled. There is very little supply right now. Normally this would move the stock higher but it has not happened. The russell balance should have sent the stock higher but it did not. What price is fair right now. I would say $1.20-1.25 imo.
Also, a majority of those price targets were expecting an increase of subs of 500K for the entire year. They are 50% over that in the first 6 months alone. I understand the analysts must alert thier big money clients it is time to move forward before they do it but this is getting ridiculous.
Is that a significant? Yes it is but it is also undervalued imo.
How many stocks yesterday went up 6% on no news. Is that justified? With the market movement and siri news anything under 10% is unjustified.
Come on guys get real. SiriXM is a cash cow for traders and has been for many years. Ask youself why is that and how do they keep it a cash cow? This is worse than a roller coaster and many are sure keeping it that away because it makes them $$$$$$$. Call it what you want but I say it is and always has been abnormally moderately manipulated/controlled one way or the other. Markets are nothing but govt sanctioned legalized gambling! Greed and SiriXM is no different. Yes a lot of things do effect stock price and movement but there are other forces that are pushing SiriXM further than normal one way or the other. It is all about $$$$$. If it can be manipulated/controlled they will do it period. So what is the true worth of SiriXM. Who really knows, some say more and some say less. Who do you believe? It is not about short term it is about the end result. For me it is about the $$$$$ at this time and stage, so manipulate/control on, GREED.
Sorry Spencer, you are way off on this one and that is why I will continue to follow “those other sites” for accurate information regarding Sirius-XM.
I have been following this stock for many years now and every time Sirus posts positive news in numbers, forecasts or programming, many news organizations come out with negative articles. THESTREET.COM just happens to be the most transparent, but there are many others.
Listed we all know that if Sirius succeeds, the NAB and free radio will disappear. They fear this and spend lots of money lobbying the FCC ,the government and possibly new organizations to stop the growth of Sirius XM. There are no conspiracy theories here my friend, it is factual information that the NAB is spending millions to lobby against Sirus. Add on top of that the liquidity of this stock and the way our market manipulates stock such as Sirius and Citibank at such high volumes of short trading, you would have to be a fool to not see the truth. A motley Fool!
LBD….
I always encourage people to get as much information from several sources. I am curious as to what “other sites” you are referring to though. Post it up here, look at the last 10 articles on those site you call more accurate, and we shall see. I would also ask what about this site is not accurate. I will stack my site up against any site in terms of accuracy.
Free Radio will never disappear. It will continue on as it always has. Sure, they will need to change their business models, but it will not disappear. To think that free radio will go away is a fools errand.
Does the NAB lobby the FCC…Damn right they do. I would expect no less. They are a competitor. Pepsi advertises against Coke. That is not market manipulation, it is competitors slugging it out.
I did not mention anything about the NAB. A conspiracy involves planned actions by more than one party. I have seen time and time again people make insinuations that simply have no basis in fact.
The street.com can beat up an equity all they want. It does not mean that the mm’s and CNBC, MSNBC, and analysts are all in cahoots and planning the demise of SIRI. That is foolish thinking.
When Sirius XM posts constant growth over a period of time, those that like to hate the stock will not be able to work against it.
I mean really now….is yahoo really publishing negative SIRI articles because the CEO is on a certain board? Think about it. It is yet another foolish conspiracy theory that naive people send me emails about. I almost fell out of my chair with that email this morning.
Next thing you know someone will say that Rush Limbaugh ate at the same restaurant as Jim Cramer, and he put his fork in the glass at the end of the meal signaling Cramer to beat up SIRI because Glenn Beck is now getting exposure….then Cramer texted his mm buddy who put in a signal trade at 2:04 PM giving the rest of the mm’s the chance to know which way they would take the equity, then yahoo held off on publishing an article til everyone else but the SIRI long could position themselves for a trade to make 3 cents on the swing. It is getting so far fetched that it is almost comical.
If you really think that there are not any planned actions by large corporate institutions in today’s market, then you are the one being naive. It is a common everyday occurrence and is at the root of the recession we are in today.
The problem is proving this is happening, but make no mistake, the SEC is probably reading this and other articles that bash Sirius at every turn. I’m sure they are also investigating the board members and shareholders of many companies, including CSNBC and the street.com. Look how long it took them to charge GS with Fraud directly linked to the recent market crash.
And here you sit and try to tell people that this is all make believe and that there is no way possible that people will collude when Billions of dollars can be make on fractions of a dollar.
I bet you don’t think the recent market drop has anything to do with the new financial regulation bill either. As soon as that is passed I bet we see a lot less manipulation, but until it does, these crooks will continue their manipulative ways, all the while laughing at guys like you who justify their shenanigans.
By the way, I do not think that your articles are false. I guess we will just have to agree to disagree on this issue, and I will continue to read your blogs. I apologize if my comments implied that you or your articles are not factual or accurate.
We know for a fact that Paulson (hedge fund) and GS were in the same office picking and choosing what mortgages would go where.
What has been done?
NOTHING
Revenue, Revenue, Revenue……….
Let’s keep it simple. 500,000 subs x $10 / mo = $5,000,000 a month for $60 MM a year. I recall Mel talking about 70 cents of every subscription dollar going right to the bottom line which is a cool $42MM. Do that a couple quarters…………
The problem with SIRI are not metrics, but 3.8 B shares outstanding and $4 B in debt. I hope to hear something on these two issues during the 2Q2010 cc.
SL…I agree. The float and debt is an issue that takes time to service. A few outstanding qtrs will help.
In the mean time, they will be used as the rallying cry along with SAC the street,motley and others will use to get hits to their websites. They have to be laughing every time they post a article regarding Sirius.
How many other $1.00 stocks do you see them writing articles about??? Hell, we probably get more press then apple
imho
vaporgold
Spencer,
For fair and balanced treatment, it would be great if you repsonded to the main points of my post. I respect your opinion because I do read multiple sources and find yours one of the best and the most consistent in terms of objectivity. Bear in mind that when I talk about siri I have in mind their business today, two to three years and five years from now. It is preposterous to value the company at five bucks per share now as it was done five years ago when they were losing money in droves. It is stupid not to acknowledge that the company is hugely diluted. Nevertheless their business model appears to work very strongly, they started making money and they are GROWING again at a very strong pace in spite of doom and gloom predicted by everyone able to talk. How much more proof do we need to start valuing the company for what it is worth and for its huge potential. I said earlier many times that 2010 is their consolidation year and 2011 is their break through time unless we face another disaster in our economy.
Incidentally, it is highly unlikely that all their new subs in Q2 are from OEM whose numbers are not strong enough to produce such results. It is quite possible that other segments may have pitched in substantially and their Q2 SAC may be lower than prdicted.
It amazes me in this the “supposedly” most advanced country in the world that people refuse to look at things in a fashion that takes into account all sides of the story BEFORE making up their minds . That is exactly why Fox news and MSNBC have followings people would rather hear what they want to hear , the truth be damned !
Then again what does it say when most of the people in the country would rather take the words of people that wrote a book 2000 years ago . That thought the earth rotated around the sun and was flat than our modern day scientists who have proven at almost every hitch what a bunch of hooey they are being sold .
God Bless America !!!
We EFFING Need It !!!
SAC,SAC,SAC!!! Time to restructure the biz model. IDLE RADIOS NO SAC.I take that back, there was SAC when they hit the market. A wasteful biz model “IF” you don’t find a useful market for used satellite radios. It’s coming, because it has to.
I continue to enjoy what you’re bringing to the Buzz, Spencer. Keep up the great work!
To those that cry manipulation, I say who cares even if it is true. Hit the sell button and buy more shares at a lower price. Anyone investing in SIRI clearly saw the short interest building, even into the addition to the Russell. So what did that tell us? We would need to see at least $150M on the buy side just to even offset the sell side orders. The lack of volume into the Russell other than its final inclusion day meant that the sell side is likely to continue to win this short-term battle between bulls and bears. So why fight it. I hit the sell button at 1.09 at EOD on Russell day. I’ll buy again at 85c or lower, or when I see the SI begin to signficantly subside. And the SAC increase pointed out here by Spencer is a good reason to temper short-term bull expectations. Shorts have a plan, and that is to take the stock lower. Until you have billions under management, you cannot fight it. But until then, enjoy the beat down and accumulate for the next move higher.
There certainly are things going on behind the scenes. There are hundreds of millions of shares that Sirius XM makes available to Goldman Sachs for shorting purposes. This was a legitimate part of a lending agreement with this as a bonus. Why Karmazin chose this kind of bonus is something to ask him. GS has to keep shorting to earn its bonus income, so the price pressure is always down. It’s not talked about much. Are there also other companies with this bonus?
As for other conspiracies, I’ve been listening and questionning more than claiming. But I have no question that major powers behind the scenes exercise large scale control with an agenda.
Bullshit, someone is cooking the books. this stock with its liquidity and subcribers should be on the $9.00 per share.
stop the manipulation.