Comments on: Sirius XM: Show Me, Don’t Tell Me

By: Gfoley

Gfoley — Tue, 19 Aug 2008 04:21:56 +0000

The “Satellite” is the future of communication and beyond. Global communication demands it, and those of you fortunate enough to afford have that uninterrupted music or news in your vehicle see the benefits of satellite and have witnessed it’s fruition. With that said, Serius/XM hold the keys to a future that will move forward — regardless of Serius/XM. Draw your own conclusions.

By: Alex

Alex — Mon, 04 Aug 2008 01:19:15 +0000

Homer – thank you. That was very helpful. I hadn’t known about it and I’m frankly embarrassed to invest and not know about that! – -

By: homer985

homer985 — Sun, 03 Aug 2008 23:43:26 +0000

Alex, look at the Pro Forma adjustments:

http://www.sec.gov/Archives/ed.....xv99w2.htm

By: Alex

Alex — Sun, 03 Aug 2008 19:24:22 +0000

Homer – why do you say it’s trading below book value? I’m confused. When I look at the balance sheet, I see a non-existent book value, a negative equity. If one were to hypothetically liquidate, there’s nothing left over (there’s a deficit unpaid), so where do you get your calculation of a book value and how?

By: homer985

homer985 — Sun, 03 Aug 2008 17:10:40 +0000

Jeff, it is important to know that Sirius didn’t set the price at $1.50, per se.

What happens, is that Sirius loans the shares to UBS/MS for a nominal fee (which incedentaly is $0.001 per share… or about $262k). UBS/MS then use them to loan to the hedge funds to short… they even found buyers for them. The problem is, hitting the market with 183 million shares (initially) with another 80k waiting in the wings), it’s going to dilute the marketplace. The $1.50 was the price point in which UBS/MS felt they could get enough buyers for the new shares. Sirius had little say in it.

I understand the betrayal part — however, how much will the lower Coupon save them? Likely at least $33 million annually — over 6 years — we’re talking nearly $200 million.

Short term pain, long term gain.

The fact is, anything under $1.62 is below the book value of the company now. That is historically not normal. How is that these companies can trade at 4 times their book values as individual companies — and now, UNDER the book value as a combined company? It’s insane. I don’t see it lasting… and I don’t make pps predictions very often.

Right now we’re wittnessing shares being shorted — and merger traders getting out, killing this stock. Gonna take some time, but this is just my opinion… and I’ve been very wrong on this stock. Remember, I held XM when it was at $40 and didn’t sell it until it hit $25.

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By: Alex

Alex — Sun, 03 Aug 2008 16:40:11 +0000

I have a question – someone please help – - I am long too much (more than I’d like to say – -). I read the following that if we liked it at 3, then all the more we love it at .99 but I’m frankly getting spooked out here not because I cant wait – I can – but because of the future I now possibly see more clearly in terms of future dilution – - I see the following post and wonder how the merged co will pay this without massive dilution – can someone please explain:
Plus the combined company must re-finance Sirius’ $300 million convertible Note (Due March 2009) and XM’s $400 million convertible Note (Due December 2009). On top of working out a deal to extend (if not refinance too) XM’s expiring bank credit facility, which is another $350 million (Due May 2009). This can be extended, but the others will need to be refinanced… to a tune of $700 million.

By: Jeff

Jeff — Sun, 03 Aug 2008 07:33:22 +0000

Hi Homer,

Please can you explain something to me.
OK, I think I understand the concept of the share lending program – guaranteeing placement of the $550 million in XM notes. What I don’t get is why MS and UBS – the “share borrowers” – are forced to sell the shares they borrow at $1.50?
Also, in hindsight do you think Sirius would have been better off selling the notes at a higher rate of interest and NOT offering the hedging facility? In light of the negative and erroneous articles characterizing the share loan as a dilutive offering, not to mention the profound sense of betrayal felt by stockholders who expected a short squeeze after the merger approval only to see Sirius shorted even more, I think the share loan ended up “costing” the company a helluva lot more than they saved by way of a lower interest rate on the notes.

By: homer985

homer985 — Sun, 03 Aug 2008 04:08:15 +0000

SiriusIntentions

That is exactly my point — there is no reason for this stock to be below book value right now.

For years these stocks appeared to have an inflated book value because (IMHO) they undervalued their FCC license and bandwidth. And now finally, they’ve reassesed this and have appropriately valued their bandwidth/licenses. This greatly increased the book value of the company — but now the market value is below book value. This is something that is going to change, IMHO.

But before that happens, Karmazin has to demonstrate the cashflow abilities of the merged company first.

My point? If the company went bankrupt tomorrow and was liquidated — there would still be enough left over to give the shareholders $1.62 for each share.

The current valuation is insane.

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By: GS Broker friend

GS Broker friend — Sun, 03 Aug 2008 02:15:03 +0000

My broker friend at GS told me to take advantage of the current stock price. He bought last week for his personal account, and he doesn’t expect it will stay this cheap. He was very happy to be able to buy at such a discount and even sold other positions to buy. He’s also expecting Mel will give investors some very encouraging news this week. He believes the share price will move back over $2 after the earnings report and says smart shorts will cover ahead of earnings.

Long over 400k shares and buying more.

By: Socalrunningfool

Socalrunningfool — Sun, 03 Aug 2008 00:37:12 +0000

Brandon. You are on the right track! All the ones that thing buying later at a lower price are as demented as anything I’ve ever heard in my life. You really ought to consider what a penny stock looks like. Cause we have it. Keep up the good effort, Brandon.

Socal