Sirius XM Signals: Privatization
In a Wall Street Journal Interview, Mel Karmazin states that he would love to take the company private. The title of the article alone indicating that Sirius XM is sending signals, suggests that Mel is seeking bids on the company.
“…Given Sirius XM’s low stock price, Mr. Karmazin said he would love to take the company private. But given the state of the credit markets, “How do you find [the money] today?” If the company were generating positive cash flow, which he expects it to do for the full year in 2009, privatization would become much more feasible, he says…”
There may be several positives to this article. To begin with, a company like Microsoft, Apple or Google which has the cash to make an offer right now might be more quick to act as they would have no idea if the opportunity would pass them by in the way of a private offering. Mel has opened the negotiating door to any and all private equity firms.
My feeling is that no matter whether the company is taken private, or taken over, shareholders can expect a minimum bid of 4.00 per share. I base that number on the fact that Mel himself is averaged in the high 3.00 range. To make himself whole, he would seek at least that number.
With the stock trading below a dollar, that would be a 400% premium over the current price. That in itself should be an attractive proposition to Wall Street, and a recovery of the stock price may begin on this news.
Hee hee! I broke this news yesterday. 🙂
I agree with you Brandon….there is no guarantee, but I like the sound of this new “BUZZ”.
Could create a bidding war….or at the very least send a signal to Wall Street to wake up.
Speaking of Wall Street….woke up this morning to two more firms, Lehman and Merril Lynch are HISTORY. HOLY FUCKING SHIT!!!!
Not that it was any surprise, but first Bear Sterns…now two more giants.
Should be an interesting week! Is this the bottom? Or the beginning of the end? Yikes.
$4 dollars a share?. I hope you’re rightm but would be real happy with $2 dollars a share.
You think Mel got bent over when he pulled off the last minute financing before the metger?. Well wait and see what price he “negotiated” for the sale of SIRI. Mel’s is incapable of managing a $4.00 price and will be lucky to negotiate for 1.00 a share. The company will be sold at fire sale prices and the only person to make out will be Mel, with a 5+ million, 3 year follow on employment contract and golden parachute. If it’s gotten to this point, it’s every man for itself and Mel stands first in the bread line. Expert a big smile and sincere apology though, after all he would be correct about the reverse split.
Pardon the spelling as I just woke up, uncaffeinated and shell shocked to the LEH news. Fuld would be a great addition to SIRI executive staff. Mel could be Executive VP of entertainment and Dick would handle the investment/busness side.
Fuld? Are u serious? Over Mel? NO THANK U.
I’m sticking with Mel.
what would happen to the people who have stock in the company if they go Private? is all of our stock lost or do we still have it?
I feel like a yo-yo…
Mel:
1. “this company is going to make a ton of money”
2. “Wish I hadn’t said that (about the debt)”
3. “We have considered sending some content to inactive receivers”
Commercial content to inactive recievers could be a nice revenue generator….hmmm.
I better get to be a part of this new company after all I have been through….I think I would even feel jipped if I $4 for my shares in a privatization.
Question: How would us shareholders fare if there was a buyout or privitization. Please comment.
Well, my avg. is $2.56 so I guess you know where I stand on the $4 buyout.
I still can’t believe Mel said, “Am I going to lend the company the money? I hope not. I hope we don’t get to that.”
LOL. At least he apologized….but man.
It’s funny how Sirius has just had bad timing too. I mean if the merger closed last year before the market crash…things would have been soooo different.
Can’t catch a break. Just as we began to show signs of life Friday before the bell…then Lehman and Merrill Lynch decide to go belly up over the weekend….LOL….jesus on a stick!
There has GOT to be a GOOD thing that happens to this stock. With all this potential…the pendulum HAS to swing the other way sooner or later.
LOL….the good thing is that if you’ve been long as LONG as I have…you’ve been beaten so badly that your no longer emotional. Which is kind of helping me deal with the insanity of how low we are in a calm manner. I’m actually laughing.
Anyway…should be a wild week.
As far as a $4 buyout….hell…I’ll take it. I’ve averaged down to about $2.40….so it’s all good after that. 🙂
PM could probably answer this question pretty well but basically a price would be determined by the potential buyer (the same for both scenarios) and would then go to a vote by shareholders to either accept or not. If the purchase price is too low it could be voted down however it all depends on who stands to benefit and how many shares they own and if they have a majority of shares.
It would not be the first time Mel took his company private… And every time at a large profit for investors and himself.
Looks like this may be a good time to average down again…
Where is Mel going to get the financing? gonna take about $6 billion or so if you include debt. May have to get a few private equity companies to start looking.
so is going private a good thing or a bad thing?
It’s been no secret that selling the company was ALWAYS Mel’s intention. He’s on record MANY times saying so.
I think in this market, it’s premature…although I am sure the usual suspects(MSFT, GOOGLE etc) are thinking about it.
But as cheap as Sirius is right now…I wouldn’t count on ANY buyout news until AFTER at least the 3rd or 4th quarter. Depending on the earnings and the refinancing of the Feb debt…I think this scenario could happen sooner than expected.
I think the interested parties KNOW the true value of Sirius….but are just waiting for some news. After all, the price is so friggin low right now they can afford to wait. How much is it REALLY going to go up short term? Not much probably.
Of the three biggies I see Google as #1, Microsoft #2 and Apple as far distant #3. Some people would disagree on Apple being #3, but Apple is mostly focused around Steve Jobs. If he drops out for whatever reason Apple would be in trouble for at least the short term and then, do they really want to get into satrad? Google being a younger company would likely gamble with satrad and has the money to do it while Microsoft might like to have it, but would they screw it all up? The money is on Google should a buyout be in the works. I’m in at an average price of $2.40 and would love a $4-$6 price.
Excellent article Brando! Keep up the great work!!
I am so excited about the potential privitization specifically mentioned your great article today that I would like to take the plunge and buy 100 shares.
Question: I need to borrow the money to do it so should I use a cash advance check or take a home equity loan.
Thank you! Keep up the great work!!
GetItStraight, I am with Brandon on this as far as the potential positives. Mel has skin in the game that he does not want to lose. His gain on favorable negotiations with a buyer, if any, would likely be our gain (longs). I also like the implication of the buzz serving as a catalyst to reverse the SP trend. Except perhaps for a major tech company snapping up Sirius XM, it seems way early to get into too much conjecture. Look at all that has happened already post merger, and at the company’s announced prospects if it stays intact. On a quote refresh just now the SP is at $0.908. I want to see the trend change, an upward gap on sentiment, something that moves the SP as desired. As we know, sentiment matters. Buzz about a deep-pocketed buyer expressing interest could be what is needed to drive sentiment north. Still, after what Sirius XM has been through, I would prefer to see Mel not sell and especially not go private but instead fulfill his commitment to payoff / pay down / re-structure debt in ’09, deliver promised products and services timely to the upcoming holiday season, increase EBIDTA, advance toward FCF, and transfer acid reflux from longs to shorts. I need to add that Brandon, Tylor and few others on this blog seem to have far better resources than I have, and I defer to their opinions. I am just another retail investor using an online trading platform to try to maximize gains and minimize losses.
Hey PM, i think all those things you mentioned WILL happen first before Mel sells the company.
friggen, I’m also following the banking sector news. Lehman! AIG reportedly may be next, down 36% pre-market today. MAJOR changes coming (with one, limits on shorting selected stocks, not coming fast enough). I sure hope the SIRI exec team works hard to shuffle up in the queue and can secure a loan from some stable source (GS?) to stay afloat and keep working the business plan. And/or, Mel could suprisingly and contrary to his latest statements express additional confidence through some targeted “financial aid” (yes, like a low-interest college loan, only the company would repay Mel). Mel’s ample coffers are a prospective source at this tough time, unless for some cryptic reason he cannot do this. Funny, too, that none of the threads mention the prospect of VC or similar and even other private individual funding. (I know, VC historically gets poured into IPOs–but they are VENTURE types and are used to weighing risk against capitalizing young companies. Merged Sirius XM is technically young and needs some wind at its back instead of constantly in the face.) What firm or Buffett type watching all this wouldn’t at least think about ponying up at such a low cost for the prospect of returns starting as soon as a year from now, maybe 2010 at the latest? I’m probably showing my ignorance, but just thinking out loud. Long SIRI. No positions LEH or AIG.
AIG….although in trouble…should survive. I am glad the Government didn’t bail out Lehman…but AIG is HUGE…and I don’t think they’ll let it suffer the same fate.
Rumor has it Warren Buffet may step in too.
This past year has had several such crisis in the financial sector. Each time a bunch of companies looked in danger and then only one or two went under while…the rest lived on as the market rallied. I think the same will happen here.
We aren’t out of the woods by any means…but I BET you in a few days or week there will be a rally, and then the bozos on CNBC will be saying how the market has finally turned a corner, and they’ll talk about a bottom in the financials blah blah blah.
Until of course the next crisis.
Mel would love to go private. And I would love to be dating a supermodel. Pardon all the hoopla, but with a stock price of $4, does that not equal a price tag of over $12 billion dollars? And what about the debt, at over $3 billion? Doesnt that add up to $15 billion dollars of a committment? Having the cash as a Microsoft or a Google is one thing; spending it is another. I know Mel has a history and all, but in this instance the numbers and the product itself do not add up. If Sirius had cash flows in the 4 – 5 billion dollar range relating to revenues, then perhaps. But they are not at the point of having a national advertiser.
I for one am not buying into this, at least not right now. Not sure why Mel made such a comment, but he should focus his time on getting the 2009 debt issues resolved first and he should keep his mouth shut otherwise.
There is no justice! Napster goes from $1.20 to $2.50 in a day after Best Buy announces it’s bid to buy it.
So friggin Napster man….more than DOUBLES in a day….and SiriusXM(a TRUE media company) is languishing without a bidder at these INSANELY low prices.
I just don’t get it.
GS has a noose around the neck of SiriusXM. Until someone steps up (MEL!!!) GS will continue to manipulate and strangulate this company.
Aren’t there other companies out there that GS can F@#K with?
Lol.
Come on. Enough already. Leave us alone. lol.
I know i know…they’re making money off keeping the price down.
I just want a game changer to happen. Something huge that would shake wall streets view of the stock….and leave GS TOTALLY F@#KED.
How sweet would a buyout now be? Come on MSFT or GOOG….make a friggin bid already! LOL.
Ain’t gonna happen i know…but a guy can dream can’t he? 😛
Brandon, I have been wondering if Sirius XM should go private (I wrote in the Forums section). I want to ask you these questions: In this environment–changing by the hour it seems–can Mel really get a favorable deal done? What chance do you think that Sirius XM will go private? And along those lines, do you feel this is the only option Mel has right now? This issue has to be solved one way or another by the end of the week. I truly see that anything can happen in this market, and my worry over Sirius XM (and more so, their debt) is starting to peak. Thanks.
First, Brian, if an offer is more than your cost average, its a good thing. If an offer is below your average, its a bad thing.
REM…I ‘m a little worried too, and I am looking forward to reading Tylers article. I think it may hold an answer or two.
>My feeling is that no matter whether the company is taken private, or taken over, shareholders can expect a minimum bid of 4.00 per share.<
Your CEO that is supposed to be looking out for your financial “best interests”, is saying that he would LOVE to take the company priviate when the stock is at it’s historical lows¿¿¿¿¿ And you think this is a good idea¿¿¿¿¿¿ IF your CEO was looking out for it’s shareholders best interests, and SIRI XM was really going to be this giant generator of profits. You CEO should be making statements like. WE WOULD NEVER SELL THIS COMPANY AT ANYWHERE NEAR THESE PRICES.
Mel wants to take it private so he can rid himself of the “unsophisticated” shareholders and he can walk away with a nice ownership percentage. A quick trip through BK and some DIP financing would only make it better.
You guys already got tied to the stake and burned once during the “5 minute” refinancing deal in July. 17 months for merger approval and the guy doesn’t start shopping financing around until Friday night after approval?? And they spent how much on “merger related expenses” each quarter. And you wonder why Mel thinks his investors are “unsophisticated’???
I know this post will never see HTML because the “editors” don’t want to face the truths… $4 a share buyout!! LOL!! You’re not in Kansas anymore Dorthey. You’ve been rode hard and put away wet. Time to wake up.
And so it goes,
PCSTEL
Not to be petty, but you can’t go calling us “unsophisticated” and then misspell the name “Dorothy” sorry. 🙂
It’s easy to play armchair quarterback and bash like you are doing. Heck…true longs like me are angry and have vented on occasion too…but for you to CLAIM to know what Mel’s intentions are only point to your own bias.
Question, and be HONEST…are you a short? Or are you just a frustrated Sirius investor who sold and is bitter? It has to be either one, because no one who doesn’t have a horse in this race would leave such a passionate message out of the “goodness” of his heart.
My point is…you may think you’re being impartial, but you are as biased as anyone.
I’m a long whose been battered, and I don’t like the situation we are currently in…but I’m a “long” for a reason. I think if we can weather this rough economy, I believe in the company and CEO.
You DON’T….or you are biased and won’t let yourself see the potential upside.
Either way…time will tell which one of us is right. 🙂
friggen, my attitude toward shorts is they should be welcome here–so long as they make reasonable comments. We need to see the whole picture. Ugly as it is for us longs today, there’s always tomorrow. What shorts and longs alike cannot see (only predict and speculate about) is the future. I remain long because the possible outcomes at this point have not sent me running for the exit, or moved me to plunk down more coin. I’m holding for now. I do need to exit, to work, so I’ll check the threads afterward….
>Question, and be HONEST…are you a short? <
Well, I can provide you with an HONEST answer. But, the question you have to ask yourself is. Are you willing to ACCEPT an HONEST answer. Because if you are not. Then it doesn’t matter because you will continue to believe what you want to believe. It is called Denial.
The HONEST answer is. No position in this equity, No Options, No Debt, Nothing.
I have been SHORT the equity of SIRI and XM off and on over the last 7 years. I have made money off of these companies being short over the last 7 years.
http://messages.finance.yahoo......#038;off=1
Yes, I am a notorious SHORT seller. Satellite communications companies are my speciality. Iridium, Globalstar, Loral, etc. I have made a small fortune shorting these High Debt Busted Subscriber Model companies.
I have seen this exact movie many times in my experience.
Everything I read here from those holding the equity LONG are just replays of the exact forms of DENIAL that I have seen from other investors that ended up holding to ZERO.
Now, the next question you will ask is of course. Since I have no position. Why are you here? LOL!! I have spent 7 years warning investors about these companies. There CPGA is huge and they only recover a pittance of ARPU. Combine this with the horrific CHURN metrics and anyone with a basic knowledge of subscriber models can add 2 + 2. I am not here to “SAVE” you because I know that you don’t need saved. I only wish I had a nickel for every LONG that told me that line over the years.
I am simply here to tell you to look around. Everything I posted in my earlier post is a FACT. 17 months for merger approval and they don’t even shop for financing?? You have to be kidding me. Sure Mel had plenty of people to Blame. (Cramer, FCC, DOJ, GS, etc). But, why wasn’t he shopping the financing before the merger was approved. You know.. Just to test the waters. This is HIS JOB! His number one responsibility is doing what is in the best interests of his shareholders. And he has failed. Was closing the merger at any cost in the best interest of SIRI’s shareholders? So what if the NAB filed an injunction. If the available funding options were poor, then he should have shopped the deal around. But, Mel just wanted to be seen as the “Deal Maker”.. So he tied you guys the stake and set you ablaze.
Now he’s saying he would love to take the company private when the stock is near historical lows. Note. He didn’t say he would like to sell the company outright to the highest bidder.. He specifically said he would like to take it PRIVATE. And like it or not. Mel would walk away with a large ownership percentage in such a scenario. A trip through BK and the wiping our of the debt and the content contracts would only make things better.
You claim you “believe in the company and CEO”.
That is called “faith based investing”. You throw logic and common sense out the window in exchange for faith.
What has Mel done for you, to provide you with this commitment of faith?
The question you have to ask yourself. Has Mel worked to promote the “best interests” of his shareholders? At any time? Whatsoever?
In my opinion. NO!
Instead he used you to write pro-merger letters for what you believed would be a return of the favor (scratch my back, I’ll scratch yours) in increased share price. What you got was last second financing that wasn’t even shopped around. A 70% reduction in share price, and then to top it off.. He called all of you.. Unsophisticated!!
Now he says he would love to take it PRIVATE when the stock is at near historical lows.
Like they say… With friends like that… Who needs enemies.
Denial is a terrible thing.
And so it goes,
PCSTEL
Privatization would really piss me off. I bought a lot of sirius stock because I believed it would be a good long term investment with huge potential.
It would be a huge slap in the face to shareholders who like me have been riding out this storm, watching their holdings drop 70% and finally when it starts to improve they plan to screw me over with a forced buyout?
I know its just speculation at this point, but if they do that, I will seriously cancel my subscription and never listen to sattelite radio again…
I would rather watch sirius crash and lose all my $$ than have them force me to sell my shares back at the same price I paid for them.
Thats some serious nonsense – if they do it i hope they go bankrupt and mel ends up on the street
….or he could run for president. 🙂
will someone please post mels email address so we can all et him know what a horrible idea going private would be?
I think a million e-mails jamming up his box might communicate the sentiments of shareholders who don’t want to be kicked in the face for their loyalty.
PCSTEL, thanks for the candor. As I’ve widely posted, I came in as a trader on the long side but, as time wore on I took sides with the company because it is a David facing a Golieth. So I am a soft touch in that regard. I have no problem shorting to a reasonable extent. But you have to admit, if you look past the CEO, that Sirius XM offers what people want. Shorting a company that sucks is one thing. Shorting one that deserves a break from ethically minded people is quite another. Go back to 2003, March timeframe when the SP was in the 30-cent range. Maybe you were on the short side for the slide at that time, too. If so, congratulations but consider this. I avoid shorting because of damage it does to my psyche. I prefer to go long and look for reasons to be optimistic (while also doing my homework on fundamentals and patterns). This company is special–in no small way because of the pure hell Sirius, SX, and now Sirius XM went through during and since the epic length merger. And rocked as has been since the merger, it is still a going business. What will the coming weeks and months hold? You have your views and I have mine, but one thing is for sure, the clock is ticking and cannot be stopped. Right now it looks dire for SIRI. Tomorrow may be no better. And maybe you are right and the stock will go the way of the dodo. Too bad if that happens, and not just for us longs. Too bad for struggling automakers that depend on Sirius XM to attract buyers. Too bad for struggling retailers that will need to find a less attractive product and service offering to replace cool and unique SATRAD. Too bad for all the manufacturing shops that contribute components for the company’s radios and peripherals. Too bad for struggling lenders that will have one less business customer. And too bad for nearly 20 million vulnerable subscribers that will miss not only their favorite current programming but also all the promised content and new hardware. Too bad as well for shorts that drove the company to extinction rather than just trade to target price and move on, leaving the company perhaps a little bloodied but otherwise healthy. So, my short oriented friend, all the best to you. For my part, I am staying long. I believe in American business resilience. I haven’t checked Sirius XM’s cap level in a week. Last time I checked it was still a minor mid cap. Maybe its effectively a small cap at this point, but so what; it can still regain traction. Google or do a Live search on “down but not out.” –PM
(mp3candy: Mel’s email address is on the company website, along with those of his C-level officers.)
Correction to my post above: “SX” should read as “XM”.
>>>And maybe you are right and the stock will go the way of the dodo. Too bad if that happens, and not just for us longs. Too bad for struggling automakers that depend on Sirius XM to attract buyers. Too bad for struggling retailers that will need to find a less attractive product and service offering to replace cool and unique SATRAD. Too bad for all the manufacturing shops that contribute components for the company’s radios and peripherals. Too bad for struggling lenders that will have one less business customer. And too bad for nearly 20 million vulnerable subscribers that will miss not only their favorite current programming but also all the promised content and new hardware. Too bad as well for shorts that drove the company to extinction rather than just trade to target price and move on, leaving the company perhaps a little bloodied but otherwise healthy.<<<
I believe you are somewhat confused on a couple of notions..
Just because a company goes bankrupt. Typically, Nothing really changes unless to goes to Chapter 7 Liquidation. Which I am sure Mel or several other companies would pony up the DIP financing before that ever transpired. The product and services would still be available through retailers. Likewise the struggling auto makers would continue to be able to offer the product and services. The component and manufactures of radios would see almost no effect. And the music wouldn’t even skip a beat for the 20 million or so subscribers.
You see.. Bankruptcy has very little effect on those items that you mentioned.
I mean, it all sounds so Romantic and everything. RIGHT vs. WRONG. GOOD vs. EVIL and so forth.
As a matter of fact. Did you know that SIRI already basically went through an “out of court” bankruptcy about 5 years ago.. Yeap!! The debt got wiped out and the majority of the equity was delivered to the Debt Holders.
So many of the assets that are tied to your equity today, were actually paid for by the previous shareholders that lost almost all of their investment. 5 years ago.
The Bond Holders got most of the company, and a token percentage was retained by the common. But, the music never stopped, the radios continued to be built, the auto makers continued to sell, etc.
In many cases. A good BK is actually in the publics interest. Look at Globalstar and Iridium. Both companies had BILLIONS of dollars in debt to launch their constellation of satellites to provide near seamless global coverage. The price per minute used to be over $7 per minute. But, after a good BK. Now our Nations First Responders, and average everyday folk can now get Satellite Phone Access for less than 50¢ per minute. Now that is Public Interest. Sure the investors got wiped out.. But, they invested in High Debt Risk Laden securities. They understood the Risks, and unfortunately for them. They lost.
But, that’s how capitalism works. That how the market works. You have to have checks and balances. That is why Short Selling is a vital part of our markets. It allows investors who understand the system to create Hedges for their investments to prevent catastrophic losses. Same goes for the options markets. The problem becomes when investors that may not understand all of the tools that are available to them to use lose their investment. But, instead of blaming themselves for their lack of education. They chose to attack those that understand the rules and use them at every possible occasion.
Now, I have to admit that I am not a fan of the removal of the “uptick rule”. I believe that is not in the best interest of the markets as a whole, and I believe the logic that led to that decision is flawed.
There are no prizes for attempting to be a “hero” in the markets. That is the way it is. In order to be a successful investor. You need to learn how to use all of the tools available to you. Because if you don’t.. Chances are you will just become a BITTER disenfranchised human being that attempts to place the blame for their own losses on to others.
And so it goes,
PCSTEL