Sirius XM Cramer Wars 2
There has been a lot of reaction to my latest SiriusBuzz article regarding Jim Cramer, Goldman Sachs and a whole bunch of Sirius XM convertibles they hold. Seeing as the article deals a lot with perspectives, I’d like to offer yet another perspective. I realize that I may be beginning to sound like a person who needs heavy doses of medication with this one, but see if you can follow me on this…
Let’s assume that Cramer is in fact a Goldman puppet, as many have speculated in the past. I am not saying he is, but for arguments sake just go along with it. What if ( and I stress “what if” ) Goldman holds too many of these convertibles? What if Goldman is looking to dump these convertibles but as yet has found no takers? What if, in an attempt to create a market for these converts, they talked Cramer into a new line of thinking knowing he would announce them on national television? “Buy! Buy! Buy! The converts! “
The problem is that near as I can tell, Goldman Sachs is the number one holder of these convertibles. Next in line is Bank Of America, although they hold a miniscule position, comparatively. The implication I’m of course making is that Goldman itself would have the most to gain from these proposed convertible sales, and Cramer’s recommendation to purchase these converts benefits his former firm more than any individual investor. Broker calls client, explains how Jim Cramer recommends them as an investment also, and “BAM!,” trade is executed.
With Sirius XM’s credit rating looking to improve near term, the value of these convertibles in the open market declines, which means a drop in Goldmans portfolio. By keeping the stock price suppressed, if that is in fact what these bond bullies are doing as Cramer suggests, the convertibles become more attractive to buyers. Imagine the sales pitch of offering for sale a plus 4.00 stock for 1.40 a share, at a predetermined time that the bond bullies decide to cover. A separate argument could then be made that this is the reason that Goldman has been accumulating shares while lowering their price targets.
It’s just possible that Goldman knows these convertibles are a losing proposition for Goldman, and would like someone….anyone to take them off their hands. I know I’m not making friends with any of this, but as an unsophisticated investor, I’m doing my best to improve my understanding of sophisticated investments.
Position: Long SIRI,
No position GS, BAC
It’s called manipulation…and you paint a vivid and plausible scenario. One that I have contemplated thru this whole fiasco.
When you look at the big picture, it makes perfect sense. Why would Goldman Sachs be going against what a majority of other analysts see in the company? Not that ALL analysts are as bullish as Citi…but a majority are much more bullish than GS.
Even tho I was shocked by the turn of events in how long the merger took and what happened after the merger closed…as a long, I am not deterred.
Unlike Jim Cramer, my belief in the technology and the company has never waivered.
I’ve been battle fatigued to be sure. But I’m also battle tested. And I’ll be damned if bashers will shake me out of my position now.
I see the big picture. So as the dust begins to settle, and Goldman continues to scramble for a plan to cover their position…I am not phased.
Let em bash. Their actions bely their true intentions. So convinced am I of the viability and profitability of SiriusXM going into the future, I am not worried.
Having Goldman get burned or Cramer having to eat crow would be icing on the cake…but I couldn’t care less.
Yes, I was angry after the merger. But there is a quiet confidence beginning to surface again. The same confidence that I had thru the whole insane merger delay. The same confidence I had when I first listened to Sirius radio and never went back to terrestrial.
It’s the same gut feeling I got about Apple all those years ago when computer store geeks would scoff when I asked where the Apple section was.
I get the same passion from Mel that I got from Steve.
So let people ponder Cramer’s motives or curse Goldman Sachs. In the end, I truly believe nothing they say or do can ultimately stop this company…and eventually the stock price will reflect that.
You see the camps forming now. There is a growing group of analysts who although not willing to stick their neck out just yet, are beginning to line up behind Citi and their positive assessment.
There will be a tipping point. As Mel starts to lay out his plan more clearly. As we begin to see the quarterly results. As positive news continues to come out, the tide will turn and the debt will become a non issue.
Right now it’s volatile. The shorts and bashers still have some teeth and will continue to fan the flames of uncertainty.
But as those flames die down…it will become harder and harder to ignore that Mel is right. SiriusXM radio is on it’s way to becoming a major media player.
Yeah, I am biased. But I wouldn’t have invested in the company if I didn’t believe in it.
And it’s why I question Cramer’s complete change of tone about the company. I mean aside from the debt deal Mel did…NOTHING that made Cramer LOVE this company changed. NOTHING.
Except for the fact that they DOUBLED their subs overnight and created BILLIONS in synergies going forward.
Yes I felt cheated post merger. But all thats happened is a delay of the vindication I know is coming.
The next 6 months could be rough. It’s going to be a constant battle of the debt and convert issue being used by the shorts and bashers, and the positive news that is sure to start coming from Mel and company.
Long and strong baby. Long and strong.
Peace out.
If in fact the scenario you depict is true, then it is illegal and criminal. The SEC and FBI should investigate and take appropriate criminal action. Mel, what are you doing to protect the investor? Your allegiance is to the investor. We are numero uno. Do what the CEO of Overstock.com did, expose the true travesty of the company. Name names…they are killing the investor, you and your company. I hope you have good news after Labor day because if you don’t, you will be crucified by these manipulators. They will short SIRI to under a $1.00 which would be detrimental to investors.
frigginregan good reply. you’re right about the future of sirius xm. For now, the stock may continue to get beat up but I think the bottom is 1.2 and I hope to see the stock trading in the 3 range within 2 years. So in the meantime keep buying more shares dollar cost averaging! It is something to take notice that in the future odds are a brand new car will be sold with SiriusXM… also after old deals are done… SiriusXM will be in much more powerful position of bargaining cause right now GM is totally ripping off XM. THe growth is still there, and that is KEY. MEL has also bought a million shares recently, the insiders believe too! Its foolish NOT to buy sirius for less than 2 dollars a share!
Brandon, Because I am also an unsophisticated investor I need some help here. The “convertibles” that your talking about are the ones that are due in Feb.15,2009 and were issued on Feb. 2004 ($200Mil) and March 2004 ($50). The convertibles are 2-1/2% and are interest paid on Aug. 15th and Feb 15th through maturity at which time the Stock Convertible Rate is 226.76 shares for every $1,000 invested, or $4.41 / share. GS has control over $127.8 Mil ($130 Mil as you earlier reported.
If these are the convertibles that we are talking about, not to be confused with XM’s recent convertible deal. How does it serve GS to take down the price of the stock in an effort to sell these convertibles off when the Convertible Price, $ 4.41 / share, was set at the time of issuance?? Also the 2-1/2% yield has only one payment left and isn’t attractive to anyone and they are not secured by Sirius XM assets.
correction issued in Feb. 2004 ($250 Mil)
I think all this screaming is pointless. Either you BELIEVE in the company or not.
If you DO…like I DO…you can stomach the volatility…because once the synergies become reality and Sirius starts showing a profit(which they will)…then the bashers and shorts will lose their advantage.
Face it, the delayed merger and limbo it created was a gift to the shorts. And it created the scenario along with the horrible economy that forced Mel to close the deal the way he did.
But it CHANGES NOTHING about the long term worth of this company. If you BELIEVE in this company like I do…you won’t waste your energy CURSING the likes of Cramer or Goldman.
And you especially won’t curse Mel.
Bottom line, he got the deal done. Yeah it sucks the way it went down…but it’s DONE. You should be excited because this is the moment we’ve been waiting for. True…we didn’t get the initial POP post merger…and that kind of anti climactic pill was hard to swallow. But if you are a TRUE long…you know good things can begin to happen now.
The bashers and shorts are hanging ALL their hats on this debt/convert issue.
Let em.
Will it create uncertainty short term. Yup.
Will it matter long term? Nope.
Again, if you BELIEVE like I do in the huge potential of the combined company….you’re not worried.
Let it unfold.
You’ve waited 18 months. Surely you can wait 6 more?
Either you believe that the next several quarters will show signs of growth or you don’t.
Sirius’s last quarter as a solo company showed they’re still growing. Even with the auto slowdown and bad economy. That says alot. And as a combined company…this can only get better.
If this stock goes to a dollar…which I hope it doesn’t and DON’T think it will…but if it does…it’ll happen between now and February.
But with each sign of good news and reports coming out…it’ll get harder and harder for the likes of Goldman Sachs and Cramer to keep the share price down.
I don’t know about you…but I’m just starting to get EXCITED again.
As i see it, the only conflict I have is wether I should just hold my shares…or sell if I think Goldman may manipulate it short term to $1…and then BUY more then.
Because if I had done that last month and sold at $2.80…and bought back now, I could have DOUBLED my shares and erased my huge loss potential.
I can also just hold and add later if it drops…
either way, I will be a long term holder of shares.
Just trying to work out my strategy based on what may or may not happen in these early still volatile stages.
Will Goldman be able to knock it down to $1…or will Mel surprise us with news and will that news counter act the shorts agenda? Could we get a pop to $2 BEFORE the infamous February refinancing Cramer warns us about? Could the voices of the more positive analysts concerning Sirius finally wake Wall Street up and create a more balanced view of the company?
Only time will tell.
Strap yourself in…things are going to get interesting. At least THIS time Mel doesn’t have his hands tied behind his back like he did during the FCC delay. He can fight back. The company is merged.
Am I the only one who finds that exciting?
This fight is FINALLY getting interesting!
Well, here’s another thought.
How about GS is correct, Cramer is correct and SIRI is a money losing POS?
Cos…
First understand that in writing these last 2 articles, I’m allowing insight into my own thinking process. I’m working on the answers and I feel it is through these discussions that more information is brought to the forefront. Your comment about these converts being worthless is sort of my point.
First…why would someone recommend they be bought now? I have not priced them but I’m guessing a potential improvement in SiriusX’s credit rating would devalue them further.
So if I’m sitting on 130 million worth of useless paper what would I do? I would want to sell it for a premium. What would make it more valuable? A promise of sorts that the convertibles would reach the magic strike price…keeping them cheap keeps them liquid…I have a feeling that once they are placed, we will see an about face on the part of Goldman as they can cover their shorts, upgrade the stock, and take advantage of the price pop to satisfy their sophisticated clientelle, while accumulating a large profit in the share price of sirius..
Just so everybody knows “frigginregan” is not me. Holy crap frigginregan that is exactly how I feel also. I am glad you wrote it so I did not have to.
Brandon, Thanks for the response, and confirming what I thought about them being fairly worthless now as an investment but still valued to the current holders at maturity.
See my thinking is that to make them valuable they need to have the stock price jump above the convert price. Which to makes sense at to why Cramer was pumping the SP post merger to be at $5.
This turn around in SP is what is now making them worthless paper. After all any new buyers of the paper are buying a 2-1/2 % one time return in Feb and then their out unless the stock goes above 4.41 and in all truth 5.41 to make risking converting worth it.
The only way it makes any sense is for GS or their buddies (for future investment business) to have a large short position prior to the stock falling in price and then cover at 1 – 1.20 to make up for the Junk 2-1/2% bonds their holding and improve their balance sheet before they mature.
I don’t know, it seems to sophisticated for me to figure unless they were hoping for the business in Feb 09 on the converts and Mel said “No Way” and now their shorting to make a buck and screw the relationship, because Weinke already cemented that.
Man, this all sounds worthy of an Oliver Stone conspiracy movie!
Again, good news from Sirius is the thing i am looking forward to, and the only thing thats gonna turn this in our favor and take away the shorts advantage.
In Mel i trust!
frigginregan, I’m just trying to tease out, like Brandon, how GS can be so negative when everything from a business operations point of view is so positive. I’m also long Sirius, but this current stock price is BS. Screw Oliver Stone let’s just get the SEC, and the DOJ to do their job and protect investors.
I also can see how GS holding $130 Mil of this debt and only getting 2-1/2% over the last 4 years were hoping to get the refinancing business when these converts became due. Now ironically the debt they hold is effecting the credit rating moving forward, making the convert price of $4.41 (the only other benefit for holding the converts) a non starter at this time. With GS also not getting the XM, 9.75% convert business they must be really pissed.
Having said that and remembering Mel’s dismissal of Weinke in the conference call, I am sure that Mel has a plan or else why piss of GS, the “Goldan Boys” of Wall Street. By the way the only real reason their in “favor” right now is because the were least impacted by the “sub prime” BS going on right now, an a very good call on their part to limit their exposure the way they did.
i keep reading…reading…figureing…..wondering??…..and each time i conclude with the fact that cramers wrong 80% of the time. as friggreagan has so well pointed out, how could anyone with any integerty be so positive about a company, and change their mind in less than 2 months! the 1bil. in loss(during the long nasty fcc. etc. fight) dident happen in the last 2 months, (the time between his strong buy,buy, and his now avoid) is one of his filpflop reasons. if i was driving down a narrow road and there was cramer on one side, and a rat on the other,..id swerve to miss the rat!
position long siri. .attitude..patience!!
I hear what yer saying Cos.
But do u really think that Goldman Sachs is doing this out of spite because they are pissed Mel didn’t give them the refinancing deal?
They may be the “golden boys” of wall street, but they won’t be able to keep Sirius down for long if the synergies are real.
It’s those synergies and TRUE growth and profits that are going to protect us in the long run, and not the SEC.
That being said, there is suppose to be a sweeping naked shorting reform coming within the next few weeks.
frigginreagan, that’s my point, they won’t be able to keep the stock down for long, just long enough to make a ton of money for themselves with new investment banking business from their buddies who have shorted the piss out of this stock. Just before it trades back up they cover and run making money on the short and long side, which they already own, over 4.9 mil shares long. Then they can upgrade the stock and try and push it over the Feb 09 convert price, which I think is what Brandon is saying.
Well I guess it’s good to realize this then and play it instead of getting played.
The question is how long before this switch from shorting to covering is going to take place, and how much farther down can they realistically bring the stock down?
Things were easier for them when Sirius was in merger limbo and they couldn’t fight back. Mel is a loose canon now. An unpredictable variable.
It’ll be interesting to see just how long Goldman Sachs thinks it can play this game.
Because good news coming from SiriusXM will have more and more power as we move forward. They are no longer the lame duck in merger limbo.
Like I said, I’m beginning to get excited again. And can stomach the volatility short term knowing the future is looking brighter.
As I understand it (which could certainly be wrong), Goldman would have bought these bonds and shorted against these bonds to protect their value. Since the conversion price is significantly higher, the stock would have to move a lot for them to consider taking shares. They still get paid interest on the bonds. It is in their best interest to hold down the price, so when they sell or exit their bond position, they make a ton on the short trade. Buying up shares at this level could be to cover their short position once the bond is sold and maintain their profits.
Also, if GS is in fact shopping around to sell off the bonds, it tells me that they do not see an issue with paying or refinancing them. I see this as a bullish sign.
The 2.5% Convertibles (as well as the 1.75% XM Convertibles) were shorted against back when they were issued in 2004.
Bankers such as GS don’t go long the junk bonds of a speculative company such as Sirius or XM, without hedging against them. Their Sirius bond position converts in 28.3 million shares — the bulk of which GS went short a long long time ago. Same goes for their XM position.
I don’t mean to come off sounding so down the company, but the fact is they have Caa1 corporate credit rating… banks such as GS cannot afford to (and will not) go long the bonds of company such as this without hedging against them. Dont kid yourself into thinking that they did not hedge… the pps of Sirius means nothing to GS with regards to their bonds.
—-
FWIW… GS began building their position in the Sirius convertibles in Q4 of 2006. Each quarter adding more. It does not appear that they are looking to sell off these bonds — as they’ve been adding more over the last 18 months.
However, I still believe that a bank, such as GS, would not hold on to these bonds without some sort of hedging against them.
—–
Brandon,
I am just happy and relieved you’re finally admitting Cramer is a puppet and a crooked one for that matter, if there’s such a thing as crooked puppet that is!!!!
Cramer will do just about anything for money since he’s so afraid of ending up sleeping in his car again, and this time for good. Don’t forget:
ONCE A CROOK (CRAMER), ALWAYS A CROOK (CRAMER)
What I find interesting, and tedious, in the SEC GS form 13F, for the period ending June 30, 08. It that appears that whatever hedging was being done prior to the merger was .68 shares to 1 share, put to call, for Sirius and 2.3 shares to 1 share, put to call, for XM. Also the total number of shares for Sirius under put / call contract is only 1.8 Mil sh, a small percentage of what they have invested in these bonds, $127 Mil, which represents 66.1 Mil shares @ 1.92 /sh as of 6/30/09.(the same sh market value as the put/call contract sh price for purposes of comparison)
If I’m reading this wrong, please jump in, but it would appear prior to the merge GS was Bullish with its hedge on Sirius and Bearish with its hedge on XM. It would also appear giving regardless of its indicated direction, the lack of volume of its hedge activity compared to its overall investment that they were and still are exposed to risk regarding their bonds (similar and more dramatic for XM) and decided to take an aggressive “short” strategy after the merge.
What if someone were to give you professional advice for free? My lawyer charges $75 for saying “HI”. Cramer and anyone else that gives free advice sets off little alarm bells. No one does anything for nothing.
Frigginregan’s beliefs totally mirror my own!!
In the long run we the stockholders will win.
Debt is finally defined. Regulations,defined! Ground zero is here! Mel is finally unleashed in a medium that is truly his forte. New exciting announcements, radios, packages forthcomming. It’s the perfect economic time to introduce an affordable gift. “Patience Grasshopper!!!”
Only good news is on the horizon.
cos1000, what you don’t see in 13F filings are short positions. All that is reported are long positions in convertible debt, shares, calls and puts. So there is no way of knowing what the size of their short position is. It is my opinion that they are short at least enough, to hedge against their long position of the convertible debt.
Homer985, thanks for that, I’m still trying to figure this detail out and the 13F was all that I could find, thanks to Brandon. Is there anyway of finding info on their, or anybody else for that matter, short position? This is the info that everyone throws around and yet documentation is hard to come by. I might as well get some experience in pouring through the detail while I’m getting a lesson on how this stock is losing me value in the short term.
A company and stock that shows growth and gain can’t be held down by anything … all these vast conspiracies and speculation circumvents the fact that SIXM is a high risk, very in debt, company. Do i think it will make it without a filing… 50/50% chance. Mel is amazing, and the market is bordering on a collapse. Let’s see who wins.