The Price of Liberty
As a writer with a huge ego, I want the world to put me on a pedestal for publishing the only story out of the thousands written that made the claim that Sirius XM had avoided chapter 11, a full 3 days before it was made official. As an investor, I want to jump for joy that Sirius XM avoided bankruptcy. I want to join in the celebration of the more than 50% gain in the stock price but, I cannot.
Like many, I am a bit disappointed that SIRI shares did not respond better than they did due to its debt restructuring. I believe that SIRI would be fairly valued at 1.40 to 1.50 a share, yet that is not my immediate concern as I believe it will get there soon enough. Don’t get me wrong, I’m glad a deal was struck but, I’m at a loss as to why it needed to be.
No, my problem lies in the deal itself. To begin with, Sirius XM claimed to have nearly 400 million dollars in cash as of its last SEC filing. I’m confused as to the reason the company felt a need to secure a deal to meet its February 2009 debt obligation of only 172 million dollars in the first place. Has the cash burn increased so dramatically as to have wiped out the company’s cash reserves? That I suppose, will be answered at the next quarterly report.
The thought that I am stuck on however, lies in the price that Liberty paid to acquire so much of Sirius XM. Just a few months ago, Sirius, in a merger of equals bought XM for 4.6 BILLION dollars. That figure does not include the attorney fees, fines nor the general loss of productivity that occurred while the FCC battle went on.
Having doubled the size of the company at such a high cost, to turn around and sell 40% of the combined company for a minuscule 530 million dollars does not sit well with me. This great deal for Liberty begs the question; if 40% of the company is worth 530 million, is the company as a whole only worth 1.2 billion now? Of course not. It occurs to me that without that 4.6 billion dollar mistake, the company would have not only survived, but thrived.
Position: Long Sirius XM
The biggest argument against using the cash to retire debt right now is that the bond market is dead and that if funds were needed in the future there would be few options to raise any. Preserving cash for continuing operations must be a priority until the debt markets recover.
Bingo,
Cash is King right now and it will be better over the length of the deal to be paying back highly inflated dollars.
The stimulus package has already started the inflation run.
Of the greater then 100,000,000 million shares that are trading daily my guess is that none of you are buying? Or are you?- someone is!
If you have such valued opinions ,then you should not be afraid to let us know where you sit- and what you have bought lately
It would give your comments some great perspective.
The debt goes with the company. The 40% comes with its share of that debt. Hopefully in a few years they will be able to pay most of that back and the 40% will turn into a real investment toward the future.
I still don’t see how this is as bad as most people think? Malone will make out well with the first part of the loan. Sirius has more time to get the right loans/terms until April. Sirius terminates the second part of the loan, pays its termination/premium fee’s (no share’s issued to Malone). Everyone walks away a winner. Malone makes great money on the short term and stands to make a whole lot more if Sirius can’t refinance. Sirius gets Liberty inline with the company, an immediate cash influx that was needed for Feb debt, and (although bad terms) has the ability to survive through 2009’s debt if nothing can get done.
Obviously Mel knows the 4Q results and probably has a great idea of how 1Q is shaping up. This is EXACTLY why the loan is a two part deal. Sirius has good quarters, refinaces, thanks/pays Malone for the Feb debt and we all sing praises to Mel.
Well, cancel that ticket to Israel….I’m convinced now..
like the way you think dusty-so you are buying?
i dont mean lunch either
these people at the top have kept this stock down and will do so untill a rv split is needed then all the longs get wiped out, that the plan. The best news we had in a long time and we are at 13 and everyone that is writeing about it is still bashing it, think about it
I too, am shocked that nearly half of SiriusXM is only worth a mere $530 million. I can’t believe other companies like Apple or Google wouldn’t have offered a better deal to get such a huge stake in this company.
I know that things will recover, and the stock price will go up, but SiriusXM gave away too much in my opinion. If it had to be done, and that was the best they could get, then so be it. It’s like watching your brother sell his $250k house for $20k. You want to tell him he’s crazy, but if he needs the money and the market sucks, what choice does he have?
dont get your point mrk -are you a seller a buyer or a holder?
im going to start a thread on how sirius xm will buy back shares
That $20K was almost lost due to a foreclousure
It had been mentioned that Q4 will be announced Feb 23rd-does anyone know if that still holds- and if so will it be announced before or after the bell on that day?
Thank you
I own about 11000 share that were bought as far back as 4 years ago all the way up unitll last week. The point im making is with even good new this stock is being bashed and has been for years. The stock is at 13 today and i feel the powers above are stoping it from riseing. The company in time will RV split and all longs will never be able to get there starting point money back and it looks to me they want to keep it as low as they can or another words under 1 buck. With the new we all had the other day i think it should have been at least 40 50 cents, am i wrong.
MRK,
Why are the powers above stopping it from rising?
In my opinion this stock is snake bitten right now.
The media hates Sirius, and the Street hates Sirius. The only cheerleaders now are, well, us retail longs. The stock is stuck at this level because there are no NEW buyers. One of the reasons for that is because it’s constantly bashed and because it’s a penny stock. It looks like a risky investment in this crappy economy. I’m not sure how we overcome that, but I’m not sure a RS isn’t actually a good start. Heck, I wouldn’t mind them even changing the symbol…
Who knows, if the Q4 numbers are a homerun, it could generate some momentum, but I’ll be shocked if the forward guidance, if there is any given, isn’t significantly reduced from the Q3 guidance.
I am VERY concerned about how the deal went down. There was A HUGE amount of time for Mel to put together a deal with others (Apple, Microsoft, Comcast, At&T, Time Warner Cable, Verizon, etc.) and it got down to the last second, with ONLY the satellite friends, and then he used a special exception with NASDAQ? Just to get around a shareholder vote!! Something smells, and I think it’s Mel.
If he doesn’t care about us, the shareholders, then go private! Go away! Fail. Die. Because if he can legally get away with keeping shareholders out of the legal process – then what is the purpose of the law anyway? I have lost a great deal of money, as a shareholder, and I can not believe his continued disrespect of the shareholders.
I think I am on to Mel’s game… take every penny from it’s investors, and NEVER give them enough say to oust him.
Mr. Ergen, I sure wish you would have tried a bit harder, because he NEEDS to go, and you are the only one saying it.
He didn’t save Sirius, he just saved his penny stealing job.
Mel will take this company down, and the investors are just mute pawns in his theft of our money.
Mel – Please, tell the public, why was no other company involved in the talks, why did it come down to the last second?
and why did you just work with your SatelliteTV friends?
i think there was a lot more risk to ownership a few days back when the stock was at the same price it is today. that makes me think there is a ways for it to go up, but part of me can’t stop thinking the company is doomed. i mean 1 share at its peak is equal to 500 shares today. does anyone know if short interest has materially declined?