The New York Times is reporting that Sirius XM is preparing to file bankruptcy under chapter 11 and my initial reaction was one of absolute and total deflation and disbelief. I find it sickening that a company with such a growing stream of revenue could just decide to ignore its obligations and in one fell swoop destroy investors in its common stock and bonds as well. Even with sufficient cash on hand, the company it would seem, would be willing to sell out its investors for the sake of getting a free ride on the backs of those who saved and invested in its future.
The New York Times article goes on to speculate that the filing itself may be nothing more than a ploy to force Echostar CEO Charles Ergen into a potential partnership deal. I find it no less despicable that Sirius XM management would risk the savings of thousands of its investors, even if such considerations are in fact the company’s motives.
I have to concede, having followed Sirius since 2003, that the potential motive of forcing Mr. Ergen to make an offer seems reasonable. For as long as I can recall, Sirius has never leaked so much as a subscriber figure. They just do not offer any guidance in advance. The only exception I can recall was the merger rumor with XM, which I attributed to a leak on XM’s part to increase the pending offer.
In this case, Sirius provided the New York Times with a substantial news leak. In doing this, it has rendered its bonds including those acquired by Mr. Ergen worthless. Mr. Ergen now stands to lose hundreds of millions of dollars if he does not act. Sirius XM is playing a dangerous game of chess with a grandmaster of the game, and doing so at the risk of its private investors.