Investors following Sirius XM Radio (SIRI) received a wake-up call as the market closed with a 67 million block trade that went off at $0.89. The stock literally tanked in the final moments of the trading session. Theories abound, and my e-mail box has been filled with confusion, concern, and various theories about what happened.

What REALLY happened? Sources close to the situation have confirmed that the MSCI Barra Index made the sale as they reconstituted their index. The timing of this event could not have been worse for Sirius XM Radio. The company is just two days away from the Russell Index taking a snapshot of SIRI to determine if the company can qualify for the Russell Re-Balance.

Events such as this can serve as a learning experience for investors. Re-balancing, or reconstitution of index funds can have an immediate impact on equities. Amn event such as this drives and immediate action. What we can also see is that the jump or drop in price can be recovered in pretty fast fashion as well. Already Sirius XM is almost back to the $1.00 target that has everyone on the edge of their seats.

Investors will see several theories about what happened, but in the end it boils down to the reconstitution of the MSCI Barra Reconstitution. It is not a buy-out, it is not the shorts, it is not speculation about the Howard Stern. The simple and REAL reason is now known.

Information 0n the MSCI Barra Reconstitution

Position – Long Sirius XM Radio