Pros and Cons of Owning Sirius XM Radio Stock
With the share price of Sirius XM dropping into the teens, people are questioning the chances of bankruptcy now more than ever before. There are certainly dark spots for the prospects of Sirius XM. As readers of the forums have heard me say MANY times, I think that in order to be an informed investor, you have to know the positives as well as the negatives of any company in order to make sound investment decisions. Because of this, I am going to list many issues, both good AND bad about Sirius XM, and let the reader decide for themselves.
Negatives:
- Huge Debt: 1 billion due in 2009, 3.4 billion in total debt
- Financing problems: Banks are not lending
- Economy: People are not buying cars.
- Churn: Due to long term contracts and trials, the real effect of the economy may not be reflected in the churn for 6-12 months. It certainly wasn’t showing it in Q3 conference call, but churn may rise slightly in Q4, and then skyrocket in Q1 and Q2. That could have a very bad effect on the stock.
- Dilution: At this point, I think dilution would actually be preferable to BK, and everyone that voted against the share offerings and RS may want to reconsider. I would rather have my shares become a smaller piece of the company (with a chance of rising in the next year or so) than a useless piece of paper.
- R/S: Desperation at it’s finest. Is it time? It may very well be. (read reason above)
- Stern: His contract is up in January of 2011. About the time they finish off refinancing all of this debt for 2009, it will be time to start talking to Howard about renewing. What will that price tag be, both for keeping him AND for loosing him. Same goes for some other key talent, such as Bubba the Love Sponge.
Positives:
- Strong subscriber growth will outpace the low-balled projections, as will revenue.
- FCF: Company stated that in Q3, they were very close to break even, and they have no reason to doubt their history of positive FCF for Q4 would not continue. This will add some much needed cash to the coffers. 2009 will be totally break even for the year, even after CAPEX now. 2010 will be a huge year for Sirius XM, and stock will take off. (if it is still here)
- OEMS: What goes down will eventually come back up. In an article of Tyler’s, he gives evidence that when it comes to car sales, historically they come back in a BIG way. When it does, subscriber numbers will explode beyond ANYONES projections.
- Merger Synergies: The Company has already pointed to a large group of synergies that it was able to recognize in Q3 with only 2 months of operating together, and those numbers will only grow exponentially.
- Stock Price: The stock is priced for bankruptcy at this time. Any news at all about financing will breathe life into this company, regardless of how ugly financing may be. Sirius has projected that in 5 years they will be bringing in 1.4 billion in Free Cash Flow per year, so they should be able to start payind down debt in 2011, if not sooner. (Notice I said START paying it down, not pay it off)
- Possible increase in ad dollars: I agree with Brandon’s article where he states that the recent channel consolidation that happened last week, as well as the Best of Both offerings, now allow Sirius XM to market their product in a much bigger way to attract big name (and big dollar) advertisers to Satellite Radio. Now instead of advertising to a mere 9 million subscribers, advertisers can potentially be advertising to nearly 19 million subscribers.
In the end, it comes down to weather or not Sirius XM can weather the storm that will be the year 2009. What do you think? Feel free to post your comments here or over in the forums.
Position: Long Sirius XM.
In a world where the biggest financial giants of modern times are crumbling before us.
Where cornerstones of busines. Lehman. Citibank. Bear Stearns. AIG. GM. Ford. Chrysler. Home Depot.Fre Frn. GE.
Where JPM and GS and MS are completely cash strapped due to asset devaluation and accounting procedures.
Where Market Caps of these lending companies has devalued and leveraged them to the brink of extinction.
Do you really think there is a facility of any kind capable of loaning money to a satellite radio company that relies on auto sales for it’s core growth??????
These same auto companies that are two steps from Bankruptcy…………
Look read the tea leaves. Obama got elected. The liberal media refuses to acknowledge that we are almost 25% down on the S&P since his election.
Paulson and the Reblicans are pissed and they have decided to take their toys and show the country what a real “lame duck” presidency looks like.
Everytime one of these companies share price drastically falls, every single time.
The market proves to be right. Show me one other time that a Bear Stearns or Lehman or Washington Mutual or on and on, did not actually go under or like Wachovia merge before it happens.
Think I’m wrong. Maybe only with Ford. We’ll see. Citibank is right now trying to sell itself off. Just like Merrill did to B of A.
I totally enjoy the Sirius/XM product. But we are done. If not today. Soon.
I only regret one thing. Ever hearing about satellite radio.
EOM!
SoCalRun…
I don’t think the loans will be forth coming either. The RS and share issue is a mute point now with this share price as you have stated before.So hopefully we don’t have to worry about that BS.
So that leaves the “Newman Theory”.No offence meant Newman.
There’s always a chance, all the stars would have to align in the heavens or rather cash flow would have to and a few good qtrs.
But what do we have left at this point?
Maybe I am just hoping, hey where is SiriusHope?? he suppose to spread the Hope
vaporgold
Thanks PMO!!
Yeah, just need a view from a different perspective, and you delivered, thanks!
I want more news too, as I am sure everyone on this board does.
I think the cut-off date to vote is 11:59 the night before the shareholders meeting.
If we get any good news about the re/fi between now and then, I will change my vote.
Yeah, short interest on this dog is huge, I guess all we can do is watch this pig and see if she does anything weird.
Just looking at the economy as a whole, no one is safe as you know.
I am going to sit, watch, and wait, for now, thanks again for your view points.
The sun will rise tomorrow, and MOST of us will wake up in the morning, lol!!
A lot of opportunities out there too, just looking across the board, its HUGE, if you can go long, or short. Its amazing to see one day moves that normally take a month to a year, happening on a daily basis.
One analyst from across the pond called for the S@P to hit the 500 range 3 months ago. Looks like he may be right. Now CNBC and the rest of the clowns are coming on board with the same view.
Good luck to everyone and what you are vested in!!
SiriusHope Says:
WHO TRADED 12,600 shares at .0926 around .14 other trades????
Looks to me like someone put a market order in and got hosed, I could be wrong, but somebody got screwed.
LOOK who added more yesterday at .14…
Goldman Sachs Group Inc Institution 2008-11-19 11,244,513
Just look at TMA
2 weeks ago it split from .40 to go to 4 dollars.
Now its back to .32 for yesterdays low and currently sits at .44 cents.
Just to show you they steal even more from you and just doing it in a different way that some just don’t grasp.
R/S are a joke.
AND…
Just a note: SIRI is looking for a Reverse Stock Split. On Nov 7, RBS (Royal Bank of Scotland) had a Reverse 20-1 split. Their stock was at about $1 and it split to $20. Today it is at $12.58. Is this just another way to have more room for SIRI to go down. At least .15 there is not much room to go down. If SIRI gets a 50-1 split and it goes to $7.50 you suddenly have less shares and it could go down to .15 again.
I think I’d rather not split. Based on History, it won’t help. I could be wrong…Any other Thoughts?
ALMOST A YEAR AGO…
30-Nov-07 Price hit new 52-week high ($3.92)
20-Nov-08 Price hit new 52-week low ($0.14)
SuriusHope
You are absolutely correct; a reverse split will accomplish nothing, other than to prevent them from being delisted. It is basically an admission of failure. These son’s of bitches had better be putting their heads to the grindstone and thinking of a solution REAL HARD or they will be held in comtempt by millions of people who supported this company in good faith. If the auto companies tank, and they deserve to, then I don’t know what recourse satellite would have, since most people don’t listen to it in their homes (why, I’ll never know!). What a Goddamn mess !!! This is like waiting for a call from the governor while they are cooking your last meal. Hang in there, pal; maybe the phone will ring. Or maybe Mel will awaken from his coma and start acting with a sense of urgency. That would be a pleasant surprise, buy I’m probably just dreaming.
Steve
Dreamers never die they last forever…As I said before and hope its true…”nothing great is created suddenly” so look at the next 2-3 years to make this company a real success and our now painful times will be rewarded nicely.
Just look at the pps of dell msft goog appl and other premium profitable companies how they have suffering PPS’s. If our stock trades lower 10-12 it may sound crazy but i think i will add to my position another few thousand shares.
we are trading in a tight range of 15-16 so maybe the dust is settling.
SiriusHope: You are correct that a RS accomplishes nothing, unless it is in conjunction with a complete company overhaul. Mel stated on the CC that the RS would be used to maintain listing requirements only, which means that if a RS had to happen and the NASDAQ does not extend the listing requirement ban, then Sirius would have to start considering it around August of 09, and implement it around December of 09. I still think there is time for antoher meeting in there to authorize the RS is needed, so I voted no on that issue, but gave them the power to issue shares if needed, because I think they need them for CONVERTS.
My opinion.
vaporgold, My point is this, First of all SIRI and XMSR had about 30 million each in FCF 4th Q of 2006. Then in 4th Q 2007 SIRI had just over 80 million and XMSR had none but said that was because they had to pay off that last satellite they just launched. They then said they would not have to do that again for a long time and we would see not only FCF improve but all other metrics improve also. Now if we estrapulate this 4TH Q FCF from the previous years, each company will have at least over 100 million. That is being conservative taking no savings in the quarter from the merger and only a 17 million increase compared to a over 50 million increase of the last few years. OK so that gives them lets say 210 million combined add that to the around 370 million of COH you get 580 million. Feb converts have 210 million left (if that is not reduced any more), take that from the 580 million and you are left with 370 million. Take the 350 million in credit facilities due in May (once again if none are given extentions) and you are still left with 20 million. That is not a great position to be in but it is not bankrupt. Not to mention if Mels back is against a wall he could always do what he does not want to do, which is reconvert the old converts, which is exactly what the investors of the old converts want.
SiriusHope, Once again put things into the corect prospective. KMART went into chapter 11 twice before the third time and operated for over 20 years from the second time to the third time. Also shareholders kept their original shares from the first two times and did not lose a thing if they held on to them through it.
bonesy, I am not a mind reader, I am only looking at the past history of the companies. Doing that I cannot ever see how any of the media and analyst could have even mentioned SIRIXM go bankrupt because of Feb. debt they clearly had enough COH to take that out.
Now they see that that is not believable anymore so they have moved on to it being the May credit facilities. Mind you many of the investers in the credit facilities have other vested interest in SIRIXM other then just the credit facitities. For example does anyone think GM would not extend it’s credit when they are making almost a third in a year (and growing) of the credit they give them on payments they get from XMSR. For those that dont believe me look at it this way GM has given 300 million in credit to XMSR they get 5 dollars each month for each subscriber of XMSR. Multiply 1.5 million by 5 and then by 12, that gives GM 90 million a year on a 300 million loan, those are the kinds of loans that are kept at all cost.
My point is that while the uninformed media could have brought up the May debt as a reason. The analyst should have been able to see the past 4th Q FCF metrics and said at the most that if SIRIXM does not allow the reconvertion of the old converts due in Dec of 2009 or find financing for them then they may go Bankrupt. The reallity of it is Dec. was always the only real chance of bankruptcy for SIRIXM. That is even a slim chance at that because at the most they could just reconvert at better terms which is exactly what the people that own the converts want.
Some corrections to my post. First I had put GM gave XMSR 300 million it is really 150. Second there is some question if they still have it after the merger took place. I believe from what I understand they do but there is some question on that.
Thanks for removing my post.
I hope they will weather the storm… I just purchased 5000 shares at 12 cents per share.
I am really concerned however with the possibility of going to ruins in 2009…I guess only time will tell