Sirius XM Radio Investors Singing Blues
The merger is finally here. After a long and drawn out regulatory process, the birth of Sirius XM Radio has many investors singing the blues. The question is how long the street will stay on the blues channel, and will the next channel be more upbeat?
With the converts arbitrage action panning out during the trading of yesterday and today, it may well be that the stock has stabilized, and perhaps even marked a strong bottom that should become a very strong support point.
Many investors still have various questions, and the process of the transition still has a few more days to unwind. XM shareholders will see their accounts have shares that are able to be traded by this Friday. Those that were short XM will need to settle their trade, as the short positions do not transfer over. The XM shares you borrowed to sell short were bought by someone else, who has already (in theory) converted them to Sirius. Because of this, Friday may be an interesting trading day that sector followers will want to watch.
So how does Sirius XM Radio go from singing the blues to rockin’ and rollin’?
Strong fundamentals, good PR, executing the promises as committed, and keeping the street in the loop with guidance that analysts and investors can sink their teeth into. For the past 18 months SDARS has been marching to the beat of whatever suited any particular investors fancy. A consistent beat will deliver confidence.
Merrill Lynch analyst Jessica Reif Cohen issued a report yesterday where she reiterated her $4.50 price target. Cohen is a media analyst, and one who’s opinion I place a lot of weight. According to Cohen, “Strong operating leverage and high contribution from new subs should drive an acceleration in EBITDA and FCF. Improving trends in retail and improving conversion rates in the OEM channel should allow Sirius/XM to capitalize on the more widespread availability of satellite radio in the 245mn U.S. auto fleet. We reiterate our Buy rating and $4.50 price objective for the combined Sirius-XM”
Cohen sees what is in essence a “THREE-BAGGER” right now. Put a quarter or two of combined operating metrics in the mix, and the confidence of investors in analysts as well as the company can improve.
Sirius XM Radio should schedule an investors conference that outlines initial projections, the path the company is taking, and expectations. This conference should be available to everyone. Investors have a glaring need to know the direction SDARS is headed, and they need to hear it from Sirius XM Radio management first hand. Do not wait for the quarterly call. Do not wait for the annual meeting. Do it now.
The fundamentals will take some time to prove out, but there are activities that can happen now that will also show the strength of Sirius XM Radio. Good PR is key. Getting the news out. Branding the Sirius XM Radio name needs to happen. Get signs into stores, and let the world know that satellite radio has been reborn. That’s all well and good, but other PR needs to happen as well. Sirius XM Radio needs to correct the damage done by the National Association of Broadcasters. They need to prove to investors and the public that the company has integrity.
- Announce the first Open Access manufacturer with pride.
- Announce the informational and minority program with pride.
- Embrace the Public Knowledge’s of the world for their opinion on how to handle the informational programming.
- Announce that those that already have a subscription to both services can now get a family plan rate on one of the subscriptions.
- Announce when the repeater towers are in compliance with pride. Don’t let past FCC discretion’s jade the vision of the merged company.
- Spell out exactly what lifetime subscribers and those with long term contracts will get for service and why. My opinion is that lifetime subscribers should get the service they currently get, but also get 3 months of the “Best of Both” free as a trial for being loyal subscribers. If someone still has over 1 year left on a contract give the a one month trial of “Best of Both”. This move was not required by the merger, but would help demonstrate that the company is a stand-up company that is looking out for consumers.
Do you hear the music changing? Steps such as these are confidence builders. Confidence is what the street needs. Not just in the bottom line, but in the company. Build a reputation of a premier media and entertainment company, and prove the naysayers wrong by good company metrics, being a good corporate citizen, and reversing the battle fatigued feelings that many SDARS investors have.
The merger is done, and there was a smattering of claps from the street and an undertone of the blues. Management now needs to step up to the podium, and turn those isolated claps into a thundering chorus of WE WILL ROCK YOU! Get the street as well as consumers behind this company so that it can prosper.
This Is The Spirit Of Radio. It is alive in everyone. kindle the fire, and let everyone know that Sirius XM Radio is the real deal.
Position: Long Sirius, XM.





Any chance Mel sold the shares at a 20% discount to drive the common stock price down so he could buy XM at a discount? Just a thought. Being a faithful shareholder in Sirius XM common hurts! However, I am looking forward to becoming a subscriber and buying my first interoperable satellite radio this Christmas! I am not a current subscriber as I have been putting it off until after the merger was complete.
In defense of Cramer, I did see a segment video clip on the street.com where he was telling everyone to be careful due to the debt refinancing and a possible dilution of the common stock the week before the merger. He also said that buying the bonds were the way to play this as the merger took way to long.
Buy value stocks only!!
Ser..Sirius, faithful shareholder but not yet a subscriber??? How does that work? Sorry, I just can’t understand how the two, together are possible. Certainly you must have experienced the product before Seriously getting Sirius with your investment.
Here’s where the three-bagger is. The losses from anyone that believed in satrad.
When the promises continually, continually flow, and when the prices continually, continually drop, someone’s lying and it ain’t the stock!
Tyler,
You should be heading the investor relations department at Sirius XM Radio. Thank you for being the one voice of reason amongst all of the doom and gloom.
MEL-
ITS TIME TO GO PUBLIC HARD & FAST !!!
YOU NEED TO EXCITE NEW POTENTIAL SUBS, NOT CURRENT ONES !!! HIT THE NETWORKS.
SINCERELY-
ONE BROKE STOCKHOLDER
The most recent $550 million convertible offering from XM has been so mischaracterized by the press that it borders on criminal behavior. Sirius LOANED the $440 million worth of shares to the underwriters to SWEETEN the deal and guarantee its placement. The loan has to be returned when the bonds mature. The media keeps reporting this as a dilutive offering . Further, they claim it was discounted to $1.50, when in fact that was the fixed price it was required/is required to be SHORTED at (well $375 mil of it). Basically Sirius is saying, we’ll loan you shares BUT if you choose to SELL them it’s got to be for less than the price of the convertible bond. Otherwise, the bondholders could potentially recover all their money up front and get 7% on $550 mil for free. Unfortunately for Sirius stockholders, Sirius’ closing price the day before (which was possibly manipulated) determined the price of the convertible bond, which got favorably priced at $1.875 per share. This, in turn, determined the hedging/shorting price – $1.50. The end result is that $1.50 becomes a FANTASTIC opportunity for all shorts trying to cover. However, it is also a fantastic opportunity for anyone wanting to buy cheap shares of Sirius. Well, thanks to our friend Cramer who flat out told people NOT to TOUCH the common stock and the totally distorted explanations provided by the media, many Sirius and XM stockholders probably missed out. Anyway, the good news is only 23 million shares were sold at $1.50. If the share price goes up the convertible bond holders won’t WANT to hedge at the $1.50 price. Instead they will simply RESELL the bond at a higher price on the secondary market and pocket the difference. On the upside, the market won’t be flooded with those extra shares. Anyway, that’s what I make of it.
Tyler/Brandon – I find myself waking each morning and running to my computer not to check if the merger has been approved by the FCC but rather to check if SIRIUS XM RADIO filed for bankruptcy. I can’t help but think that this might be Mel’s master plan to get financials in order since he has yet to address shareholders or wall street. Anyone have any thoughts? if they were to file obviously this would negativly affect current shareholders. But how would it affect current refinancing and restructuring of debt? If they were to file wouldn’t they have done so rather than putting together this elaborate restructuring of debt? How would filing affect those involved? What would be the negatives for the company in filing? Anyone care to take a stab?
Cramer went on and on about how about how the way to play Sirius was to buy the convertible bonds. Well, the bonds were a private offering that has already been allocated. The public will only get to buy it at an inflated price when it gets resold via a listed on the secondary market.
Cramer went on and on about how about how the way to play Sirius was to buy the convertible bonds. Well, the bonds were a private offering that has already been allocated. The public will only get to buy it at an inflated price when it gets resold via a listing on the secondary market.
Everyone got their Mel on CNBC at 6:00 for about 10 minutes. He seemed to do well, but ran out of enough time to really explain things better. All and all it was a good start.
I read Mel would be on O & A today as well as Howard Stern.
I hope they have the combined company shareholder meeting real soon.
Yeah, Cramer tells us to sell as the big money loads up on cheap shares.
Following the lead of terrestrial radio stocks, with many being down 90% into the penny-stock range, hasn’t anyone figured out that consumers have little interest in “radio”, anymore.
I’ll take 10 cents /day for 4 days straight to get back to the $2 level.
This doesn’t seem unreasonable as a decent level as we wait for the positive news flow of steps the company will be taking in coming weeks/months leading into holiday season.
I feel positive that the worst is behind stock and company.
Tyler, what do you think will happen with the 2009 convertibles? Refinanced at a higher rate or will Mel try to buy at least 200 million out if he has enough cash?
COS 1000,
I made a “ton of money” in Taser (TASR) as a momentum play even though I have never owned or been stunned by one of their products. I have owned BAC for 10 years, buying on the dips while never selling and I consider myself a “faithful shareholder” even though I don’t use that bank. It is possible to be a “faithful shareholder” without using a company’s product. “SERIOUSLY SIRIUS” may not be as sophisticated as you but that is NO REASON to be condescending. Play this game of “One-Up-Man Ship” somewhere else!
It’s Sirius World,
Comparing an personal entertainment company, utilizing a new technology to deliver music, is quite different than sampling a TASER or investing in Bank of America. I was simply confused by the investment strategy. Investing in consumer retail and entertainment broadcasting company without sampling the product is puzzling. So I asked the question of Seriously Sirius. As far as “one-up-man-ship”, not my intention, so please take of your super hero cape and let the discussion go on. You made your point, and I think the companies you invested in without sampling the product would be a valid, but are not a fair comparison to my point.
I’ve Sat Radio in the company car for years.
I’ve had Sat Radio in the Company Car for years.