Why Is Sirius XM Stock Going Down?
Let me answer this question, before you ask. A lot of people are under the impression that SiriusBuzz is some sort of Sirius XM stock pumping site. Nothing could be further from the truth. In fact, I recently suggested to all our readers that they should put stop losses in at 1.20-1.24 as the stock had broken yet another bottom. To those that listened, congratulations!
To those that did not and want to know what happened today, it can be summed up simply. Mel Karmazin, in my humble opinion, gave the worst speech of his life. Despite a lot of good news coming forth from the conference, Mel made a few statements that would have been better kept to himself.
When asked about financing of the 2009 converts Mel initially was adamant that no dilution would occur. He offered up an exceptional plan that outlined the company’s ability to use cash on hand together with bank loans. Later however, he went a little farther into detail, making the statement that he hopes he does not have to lend the company money out of his own pocket.
Excuse me? Mel just told Wall Street that he believes in Sirius XM so much, that even he does not want to lend the company money! How then can he expect a bank to do the same? A slip of the tongue? An accidental joke gone astray? Absolutely, but the effects were seen in the stock price depreciation today.
The other huge mistake was reporting low-ball estimates so low for 2009, that most analysts will have to lower their forecasts. Mel might as well have said not to bother to buy the stock until 2010, because he was so conservative with the subscriber estimates for the year, that he inadvertently lowered guidance.
Of course Sirius XM will sign more than 2 million subscribers next year, but Wall Street can only go on the data provided by the CEO of the company. Mel in effect stated that the company would see ZERO subscriber growth in 2009. In fact, his estimate for 2009 will be less than the expected total of 2008. All this on the heels of an exceptional presentation outlining increases in OEM penetration rates.
Another mistake? Of course. Any idiot could see that. The problem is there are not that many idiots on Wall Street. When Mark Wienkes and Jim Cramer get a hold of this, there will be hell to pay.
Disclosure: No Position
One possiblility of such a low 2009 sub guidance is that the company will now count new subs as they activate, not as they are installed–Just a thought but it does seem to be a low number designed to be beaten easily
Yes, those are mistakes that could have had something to do with todays down turn in price or, it could be that MLB is not offered to Sirius subscribers and it constatutes a re-vote for the FCC to approve or dispprove the merger and I strongly believe that many of the supporters of the merger were under the assumption that the MLB was included in ” the best of XM,” and now that it is not, “WHO CARES!!!!!!!!!!”
Just an observation: In analysts looking for subscriber numbers for 2009 and making predictions, and Mel also predicting them, isn’t all a little bit rediculous? How can one predict a year from now what new technology will exist for Satellite radio (and what that technology will lead to in terms of radio prices and availability, what the public’s listening interets will be, if the public will continue to be fascinated by Howard Stern, if football teams have exciting games which stir up increased interest, etc., etc. All these and so many more variables, and everyone is so hung up on 3.73743 as opposed to 3.81357, or any such numbers. I wish Mel had stated a range of what he saw as possible, as even he can not predict. A restaurant puts a new item on the menu, and based on their experience they think it will be successful for the next year. But they can’t know for sure. What folly all of this is!
I missed that ending, so no thought there.
On the investing interest: If he had someone willing to pump money at the problem, he could do it. He could have done it before. He could have done it when the price was 2.50 and they did that deal that cost the company billions in value. The credit markets were bad then.
Why isn’t he now? Because of the pps, he’d be selling the company for 1.00 a share.
The biggest problem facing shareholders is that as the price continues to drop, it becomes an attractive hostile takeover target.
They could come in now and buy the company for 1.50 a share. That would be a 40% premium that the board would be forced to accept. Whoopie. I know I would not be happy with that. These are dangerous times. Who would be happy with 2.00? 2.50? I’ll tell you who. The people that will be buying at 1.00.
The company is 14 cents away from potentially being delisted. If a reverse split was not an option a week ago, its certainly becoming one now.
Where mind you, is a near term catalyst to prevent this? Q4? The stock will be below a dollar by then. He certainly can’t come out tomorrow and say “whoops, I meant 2.7 million subs in 09.
For the sub totals, could there be a concern that the Best of and Ala Cart could increase churn in short term ? Meaning, drop Sirius or XM if you have both and just keep the one service with additional package from other service.
I personaly would not do it because I have a portable Inno & Sirius Sportster 5. I might opt to pay for additional ‘Best of’ on 1 or both, but not all are like me. It also depends on the extent of the content offered – waiting on more details.
Finally an article that makes sense. Let me add that Mel thinks by having these bondholders on board the stock price can be trashed. He sold us all down the river. Never once alluded to his complete sell out financing deal. And here we go under a dollar. Wow. Isn’t it lovely.
Thanks Brandon-
I am really at a loss to explain the tone of todays question and answer section. It was as if Mel lost it, and Mel being such a seasoned veteran and obviously brilliant, makes it even harder for me to figure out.
Thanks again for all your insights and feedback.
This is where I think they got the Sub Guidence of adding 2 million in 2009:
19.5 million – start of ’09
-4.2 million (avg churn of 1.7%/mth X 12 months on weighted avg of 20.5 million during year of ’09
+3.5 million OEM’s 14 million cars X 50% penetration X 50% conversion
+ 2.3 million retail subs 400k (1st -3rd quarters & 700k 4th quarter)
I think these are reasonable assumptions and it gives a net add of 2 miillion sub estimate.
Each year churn will increse if % churning stays constant, so it’s important OEM penetration increases 10%/year to offset and retail needs to improve. At some point subs will hit a level that there will be no way to increase net adds. Maybe it’s 35 million or 40 million, but it will happen. You will hit a point where you churn the same # you add.
*** Correction to previous post
+ 2.3 million retail subs 500k (1st -3rd quarters) & 800k 4th quarter
Now because of the way subs are counted by certain OEM relationships, with a high # of OEM’s in promotional periods, the 2 million additions could be beat and if retail improves a bit, then maybe they could end at 22 million by end of ’09.
investor…
That’s the really sad part. The current run rate is 2.2 million by my estimates. That does not include any new offerings that may contribute to growth and takes no account for increased penetration rates. That’s just the status quo.
Everyone knew he low balled the 400 million in synergies. They upped them slightly today…duh!
Mark my words. They will add between 2.5 – 3.0 million subs next year.
His low-ball tactics are only helping to kill the stock.
Scot here. I’d like to hear how shareholders feel who previously owned XM sat radio stock before the merger with Sirius. They watched their pre-merger share price drop from nearly $30 to around $12. And now, their shares in a combined SiriusXM are worth a buck nothing. Does anybody out there really know what the hell is going on with this company?
And in a final closing thought, is this company on the verge of a complete meltdown where the doors will be shackled shut with the shareholders left holding an empty bag?
Scot’s Slant
I laugh at the sucker who sells this for cheap. It makes me wonder what orbitcast really knows about this company. Your credibility is being reduced to indecisive pumper dumpers.
I correct myself, not orbitcast — siriusbuzz.
Funny how Brandon sells and now all his comments are negative. You got to be kidding me right??
One things for sure, the drama surrounding this stock is unparalleled.
With yet another drop in the pps, I am tempted yet again to ponder selling and buying back in later.
I’ve contemplated this with each huge drop since the merger approval, and each time decided not to rationalizing “IT CAN’T POSSIBLY GO LOWER!”
And yet…it has gone lower each and every time.
Selling now and watching from the sidelines as it possibly drops below a dollar would be a small victory at this point.
Then I could ponder getting back in after a wait and see period.
Don’t get me wrong, I still believe in the long term value of this stock…but
… the thought of being stuck in this stock as it drops below $1 and stays there well into next year is just brutal.
Then again with my luck, soon as I sell Mel will refinance with better conditions, and we will get our first pop in ages.
LOL.
Wow I Am a small time investor>I bought some bank stock 8 weeks ago this morning my stock is up 87% I know what i’m dong when it comes.
to doing my investing (I do my home work every day)
I beleive that sirius will start showing a profit as soon as the stock holders demand accountability from managment.
In all my research I find the only thing holding this company down is the management taking on stupid programing like Horward Stern(what a bad investment for Sirius) They need to figure out how to dump him & just pay the price upfront, then at this point just maybe they will start getting more investers & better programing.
I own 4 XM radios I think XM management was way way better than Sirius.
I Am buying 1000 shares today & more next week because I think the managment will be replaced sooner than you think. BUY BUY BUY