charlesergenWith news reports swirling about Charles Ergen making a move for Sirius XM Radio, it has become hard for anyone to really know what is happening. Reports that Ergen tried to buy the company in late 2008 joined other stories that had him trying to force bankruptcy, and carrying an interest in the terrestrial repeater network. Amidst all of the confusion, shareholders find the equity price right back where it was prior to the news coming out.

Since the merger, and the collapse of share price i have been asked time and time again about the prospects of bankruptcy. My opinion was always the same. I believe in the concept of satellite radio, and was more worried about someone swooping in to buy the company cheap than I was about it going belly up.

Charles Ergen is doing something very basic. It does not require rocket science to see it, and once investors understand it, the clouds could begin to clear. Ergen is gaining leverage. He is covering his bases, and making the moves that will give him the best chance of reaching his desired goal. The real question at hand is not what Ergen is doing, but how Sirius XM Radio deals with the situation.

Now that the cat is out of the bag, Ergen has perhaps lost a bit of his leverage. The debt he has acquired is not enough to take control even if it were all converted to shares. He likely still needs to buy up shares on the open market, which could begin to drive up the share price. In addition, if other players are thinking of moves of their own, whether for profit reasons or competitive, then the dynamic could change even further.

If all of that was not enough to consider, there is the regulatory issue to think about. Will the democratic controlled FCC allow a satellite television player to become entrenched into satellite radio as well? Ergen is not only in a poker game with Sirius XM, but the FCC as well, and the stakes are high.

This will all play out over the coming weeks. Does Ergen have enough leverage? What will the company say in their next shareholder meeting? Shareholders, who have already been waiting for a long time to see a glimmer of hope now have to digest a possible take-over. Thankfully, it would be hard for this issue to drag on as long as the merger did.

Position - Long Sirius XM Radio