Test For Echo – Ergen Gaining Leverage
With 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
Something is rotten in Denmark here.
A few things really stand out in my mind:
1) Sirius likely has about 350 Million in cash on hand
2) Mel said he would handle 1 hurdle at a time (here’s # 1)
3) I can’t believe he would go down like this, this easy, this quiet after all he has said.
4) Ergen may bend a little & offer up an ok bid if he really believes Mel would file to keep his hands off the company.
5) This is not news that they are preparing bankruptcy papers -it is an option and a weapon (just not a shareholder friendly one)
6) Mel said the shorts would get hurt if they bet against him – so far he’s been wrong, but could he pull a rabbit out of his sleeve ?
7) Doesn’t he have any other offers, friends in the business to that would want to get a piece of company & help a brother out !
…agreed. I could’t exactly put my finger on it, but something seemed a bit …odd about the WSJ report. I could be way off here, but it just seemed like a well placed ad. Maybe I want to see it that way, because I have a financial emotion attached to this. I seem to be rambling now, but the story just seemed a bit “odd” to me.
Max,
“Shyster” – that pretty much says it all! It makes you lose faith in the human race. To mel and all of his cronies, I have one simple question; why the utter contempt for the subscribers?
It was just a matter of time before their complete betrayal of the subs and shareholders would lead to this companies downfall. Unfortunately, it’s the little guys who get screwed the most. That’s the American way, isn’t it?
What can I say after what everyone else has said since the BS talking heads article via the NYT.
IMO..this is a ploy that has everyone in panic mode so a huge selloff could happen. I imagine that this is Mel’s way of trying to pressure the holders of all debt due. It might work.
I would think that all the institutional holders would have dumped as well and the AH trading volume would have been in the billions not just 12 million. It traded in last few days over 100 million shares on all the rumors.
No matter what I will hold my small investment of $12,000. (avg .59) and wait and see over the next few days what happens.
Really thinking that BK is not a reality…JUST A WISE THREAT to shake things up and shake out the scared holders. Mel will leverage this threat to get funding completed and F&@K all the NON-BELIEVERS!!! REMEMBER Mel loves to gloat and smurk. He wants to comeback as the hero of the year in such a big way…especially during a disasterous market. This will feed his ego even more and he can tell everyone …I told you so…don’t mess with Mel.
yep they screwed up BIG TIME
fuck Mel and those bastards who stole this company from us….
I’m out 60,000.00
the sad part is that sirius will survive, just as a company that was stolen from us shareholders who funded it.
mother fucking cock sucking Mel!!!!! I will fucking spit in his face if i ever see him on the street.
I hope he goes to prison.
What did you expect from a bunch of j-ws. Mel took a small fortune from this co. Friends included.
the funny thing is Howard will get completely screwed. they were talking about this today on the show and you could tell that they have no clue how screwed they are!!!
It’s sort of funny. at least im not the only one getting shafted here.