I fear that range-bound is the operable word of not only the day, but the week as well. I will say it again. Until there is some news on the Liberty media front, this equity has a proverbial glass ceiling over it. What can an investor do other than wait, strategize, and prepare. While we seem to have established a decent foundation above $3.50, there is no real catalyst to take this beyond $3.70. Some folks that just like to trade can play for pennies and nickels, but that will only be enticing for a short period of time.
I do anticipate that we will hear something sooner rather than later. One would think that some sort of counter offer would come out prior to the Liberty media call, though that certainly is not required. Investors learned of this deal on January 3, 2014. We are just a week away from March 3rd! Investors are owed an update of some nature. This is almost worse than waiting on a jury to deliver a verdict!
In my opinion the street and institutions want to see some sort of deal happen. They want a deal not because of the arbitrage involved, but more to simplify things moving forward. One challenge of SiriusXM has been, and is going to be, what to do with free cash flow. The street is appreciating deals currently, perhaps more-so than capital return programs. If, when news comes, it is viewed as viable, I feel that the street will reward both SiriusXM and Liberty.
We saw a caution flag and a warning flag emerge today. This see-saw type situation can be the tune of where we are until news is announced.
If Liberty speaks before SiriusXM and says that a deal is off of the table, I feel that the equity will suffer from that news. Adding insult to injury, the company will then buy $350 million worth of stock at a price above the market value. Remember, SiriusXM is committed to buy $350 million worth of stock at $3.64. The lower SiriusXM is from that price point, the more Liberty has a negotiating tool.
Support and Resistance
Exponential Moving Averages