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.
Newman-
Your Negatives are real, but your positives are more hope than reality at this point
When you file BK, it will no longer trade and no longer matter.
Bye the way. I am very impressed with all of the recent articles by all the writers.
Wish it were different times.
Thanks.
One question that I pose to the board, but related to this..
-> For q4, since auto sales (and manufacturing) will be way down, will this actually help the company on the bottom line, since they may have to finance fewer unit installs?
Omitting the results of the obviously lower subscriber additions under this scenario…
Yeah, every one is a critic.
Good articles/Newman/Tyler/Brandon/ 🙂
Well here we are at .16 I am glad that my limit order at .15 did not trigger. I did not expect this for another week or 2 out, thought it would bounce around the .20/.30 range until the votes were counted.
Who knows, we could close the week in the .30, not likely with the big 3 doing a crappy flop on the bottom of the boat. Well I will go down with this ship, had to vote yea on the ballot across the board. I had to give Mel and the board wiggle room to try and stop this madness.
The big 3 need to retool and flush out that union contract that is breaking their backs. No more bailouts!!!Government needs to stay out of the markets, the more they monkey with it, the worse it will get.
Maybe in a few years, if we can weather this storm, We will be called upon to do a forward split. Who knows, I am not Ms Cleo. If this turd goes below .10 I will cost average down below a 1. If we go into chapter 11, then lesson learned, I am not a gambler.
I would like to thank: Cramer/Wainkers/NAB/Libs/and every one gunning for the death of SAT/RAD.
Congratulations!! You took out the shareholders!!
But the company will move on, and you will have to pry my receiver from my cold dead hands.
7,500/2.00
An imperfect set of comparisons, Newman, but hey, who’s perfect? Excellent effort to enable a side-by-side look, just what we need.
Suggestion: copy your article to a the stock thread in the Forum and update its contents on a regular basis so we can keep up with the pros and cons at a glance.
who the hell knows? This is a boom or bust stock now—Financing will help bring price up and slow car sales will actually help bottom line in 4th but id still rather sign up 500k for the 4thQ
Hey folks,
If SIRI was to go BK….would we have enough time to sell our shares before it was all over?? What timeline do you all think a BK would look like? 2009…2010..?
I would love your feedback
Newmans negatives are real and it shows today with pps trading @.147
How can ANYONE not think this bitch is goin BK unless we get R/S and increase shares???
I feel like NOTHING short of Mel saying Sirius just discovered $2 Billion locked in a basement in one of XM’s buildings will drive this stock up.
I have NO confidence we will be able to dig out of this hole now.
and those of us averaged at close to $3, any hope for us? I’ve lost $250k and 2 houses because of this #@!%^$#%^
Phil
I really can feel your pain but don’t throw in the towel. look at all the premium stocks msft appl and others are all down big time. hang in there. i hope you have only one regret and that is when the pps goes to 2.00 you regret you didn’t buy more at .15
GOOD LUCK to us all and NO BK
wish I could buy more at .15 but my dumb ass bought in with what I had left in my MM at 1.00.
Bankruptcy would suck, but the thought of Mel taking Sirius private would really piss me off more than anything.
I believe this is all part of the plan to force the RS down our throats to provide more shorting fun for all.. I mean really who can reject it at this point? Anyone think we have a shot at not delisting in several months without it?? I think we all realize who won that Loral credit battle to get the cap in line. Wienkes wins again.
I am in the BOOM or BUST group.
I can’t believe I bought more at 25 cents a couple of days ago and those shares are already down 40%. this is unreal, fuckin stock blows.
Tyler stated that they can pay the Feb debt with cash if they have to. Isn’t the May and December debt of a different type? It doesn’t have to be paid, just refinanced. I thought I read that somewhere. And the other fact I read is that all companies have debt. That is not unusual. So do we have until May for a credit thaw? And with increased auto penetration rates the November and December subs may not be all that bad. Auto sales always come back. Otherwise what would be the purpose of money anyway. I am seriously thinking of buying the new XMP3. It is beginning to look like a winner. I have seen Serius XM in boats, planes and restaurants recently. It is just very convenient and simple for a lot of uses.
SIRI-Long:
Sirius XM actually does have enough cash on hand to pay for the rest of the Feb. debt. Q4 SHOULD also be FCF positive, adding to that number as I stated in the article. My only concern is if they would then have enough cash to get through Q1 and Q2 of next year if they use the $210 million on debt now.
The May debt is a bank note, so the maturity of that note can be extended by the bank if it so chooses (The bank that is). The November debt is another 600 million convertible bond that expires in November. It either has to be repaid or refinanced.
If Sirius pays cash for the Feb bond, then we have until May to weather the storm and see if banks will push back the May bond.
NEWS
government getting ready to announce deal to help the automakers…lets hope we stop sliding backwards.
Etrade traded under $1 today. Ford Motor will soon be under $1. Do we all feel that the Nasdaq requirements won’t be delayed even longer. We’re only 1/4 of the way into all of this.
Whether you are a SIRIUS holder or not, you hope to weather the storm. It matters not whether this storm is caused by panic selling or manipulation and naked short selling or any other reason, remaining holders hope to weather it. Ask not whether the sky is blue or black, but consider the way to weather these turbulent times.
To regurgitate what was said on CNBC is that to be one of the SP500 index stocks you need to have a market cap of at least 4 billion.
Currently, 175 of the 500 stocks within the SP500 have a market cap below 4 billion.
You tell me that the Nasdaq and others aren’t going to revisit some of their requirements.
The R/S solely to be relisted is Bullsh!t. It’s going to wipe us out.
I’ll take the dilution and reverse split if it helps the company avoid bankruptcy. The company is on the cusp of great things. I hope Mel does everything in his power not to make the common shares completely worthless.
GIS.
You are right on.
Mike,
I hope you understand the fundamental consequence of such things. For someone to think that a R/S and extra dilution will stave off the inevitable it sadly misinformed. What people seem to continually misunderstand is the fact that a R/S and dilution alone will not keep this company from going BK.
There are many other things that need to occur for this company to survive, and R/S and dilution are not 2 of them.
Sorry to say.
Scrf – if we make it through all this B.S. we’ll have to plan a cruise to Cabo with many of the others on this site.
In a wierd way a feel a kind of camaraderie with you guys.
Hey GIS,
It’s like raising kids. If you haven’t had one of your own, you really can’t get it.
Same with this stock. Unless you’ve been through this share ownership since before ever the merger announcement, and then suffered through the merger, you would never understand.
Cabo. Anyplace, warm with water. I’m in.
Brother can you spare a dime??????
Guy wrote on Yahoo yesterday. I’m not sure whether to buy ten shares of siri or a diet coke……………………………
Amen.
Hey, PMO
Are you considering pulling the trigger to cost average down now? Or do you think there is more downside?
I am thinking this puppy is going below .10. I hope I am wrong!!
long/7500 @2.00
well closed at .14 today..maybe at .10-12 tomorrow?
we will be a nickel stock if even that by dec 18 meeting
and the mel idiot keeps silent so he can blame the market and either go bk or go private for a cheap nickel pps
Thanks SiriusHope,
Yeah, we really need to get re/fi, and FAST, to bad we have to wait a month. And by then it may be to late. A lot of blood in the streets this week. To late to sell now. Good luck to all!!!
Newman I know you have just talked about what I have been saying for a long time the Feb. debt not being a problem. Also you said that the May credit maybe extended. That is likely, lets face it SIRIXM is not looking for more money it is looking for extentions on money it already holds. As for the converts due, they were never a problem for concern because those converts wanted to reconvert. Mel is the one with the problem with them (GS) he believes reconverting the old converts is not the best way to go and is looking for any other way out of them. Next as Newman has said they have enough cash on hand now to pay off the converts in Feb. That also does not include the massive FCF in the 4th Q that SIRIXM will have. I believe going off the previous years that that number will be between 200 and 230 million. More then enough to pay off the remaining Feb. converts and the few banks that dont extend credit due in May can be taken out using cash on hand. Lets also not forget Mel has said they will be at break even in 2009 so they really wont need very much cash on hand.
Newman, some corrections the converts are due in Dec. not Nov. and they are 400 million not 600 million.
mario, that is correct the fewer OEMs the less the cost. As I have said before that is the biggest cost to them after the satellites/CAPEX of course. Think about it this way it cost them now over a half a billion a year to subsidize the OEMs. It has cost them over 2 billion so far.
SiriusHope, You also need to put things in more prospective. F was at 8 and 9 (when SIRI was at 2 and 3) now it is at just over a buck GM was at the high twenties and now is under 3 bucks, NM was at 12 and 13 and is now just over a buck, DSX was in the thirties and is now just over 8. I could go on and on and on. My point being stocks/companies all over are not doing well.
Bankruptcy is the only scenerio left. And a new stock issuance that doesnt include current shareholders. No reverse split because it means absolutely nothing. Debt holders own sirius. A reversal will only give the stock more opportunity to further decline in value until it goes to nothing. No one will buy siri now because they dont want to buy the debt that comes with it. Better to just wait till they go under. Buy whats left and start over. KMART is your example here.
and today at .14
just 9 trading days and a 50% loss in pps
Sirius XM is not the only one
Citi was $50 now $4.5
GS was $250 now $52
Most stocks are 80% – 90% down.
Siri is not sinking alone, it is the whole market driven in the black hole by corrupt Wall street, SEC, treasury, short sellers making billions and blood sucking every one
That is the BIG negative for Siri and every other stock
Texas real state is now as good as Miami or LA
SiriusHope
if BK is clear and imminent danger, what I do not understand why some big Funds / companies are still buying millions of shares of Siri even at levels of .35 – .50 ??
Are their inveting managers stupid or do they have some millions to spare???
IMO..I agree but it could be year end writeoffs or they are shorting it? ..it’s really confusing. The posts are just IMO not wishes.
I have said it before, but I will say it again, this stock sinking into the abyss is more due to a completely organized manipulation tactic, Mel, has been known to be a star player when is comes to, wall street. Mel was knowing as a darling on wall street, for a very long period of time. There are companies that hate Sirius because of the threat of one day dominating the market. I truly believe this stock is going to down to sucker punch Mel because, and unfortunetely share holders are in this fight to take him down.
Sorry my computer is a little messed up. All I am saying is this stock is under total manipulation,
by players that would rather see Sirius Xm be no more. It truly is a sucker punch to Mel, because they are hitting him where it hurts, and that is his reputation to be known as a darling on wall street.
Might want to change your name to SiriusBasher. Cause obviously the Hope is gone for you. The entire market is in shambles not just Sirius
john, how soon will mel know how much fc they actually get from the 4th Q? I’m sure he has some financing lined up in various ways. Do you think he is waiting to see how much actual fc is generated in the 4th q before he pulls the trigger?
John,
You’re right about the debts in 2009. In addition, the December maturity note is XM’s and Sirius can actually default on it which, again, would bankrupt XM, as SIRI’s subsidiary, without affecting the parent, Sirius.
So, we’re talking about a company that will have revenues of $2.7B with only ~$560M in debts due in 2009 out of which $350M (May Debt) can be simply extended. If you have been listening to Mel, you already know that he has been concentrating on the Feb. & May debts for the time being because he has the luxuary of defaulting on the Dec. notes if things don’t go as planned in his long-term forecast.
John…
Assuming we have a decent 4th qtr. What do you project for the cash burn for Jan, Feb, March, April and May?
Are you assuming based on the Mel’s projection of CFBE for all of 2009?
If so, you are talking about threading the needle with the Feb note, operating costs, CFBE and what’s left of cash on hand.
That would be like a throwing a 70 yard Hail Mary and we come down with it.
Am I assuming correctly?
Vaporgold
On the brighter side!!
GS fell below its IPO today!!! LOL!!!
vaporgold: No, I am basing my opinions on past experience. In the entire time that Mel has been in charge of Sirius (and now Sirius XM), Mel has only missed projections 1 time, and every other time they have blown past them.
I am concerned about the cash burn for the first two quarters of 2009, as I have said in multiple locations. We unfortunately do not have any comparisons because the merger JUST closed. What I do know, is that historically Q2 has been a stronger quarter than Q3, and during the CC, they mentioned that minus one time charges, Q3 was very close to break even.
I do not think this is a 70 yard hail mary… I think it equates more to a 3rd and 20 after a holding penalty… There is a long way to go, but there is a little time to get there… VERY little
Dread, sorry for the delayed reply. I’m on a non-profit board and just got home from a meeting. Re. your post to me above: “Are you considering pulling the trigger to cost average down now? Or do you think there is more downside? I am thinking this puppy is going below .10.”
Your guess is as good as mine on whether SIRI goes to .0x, Dread, but I know that trendlines don’t lie; they reflect historical direction. Simple regression analysis also says the trend is further south. SIRI’s trendline at any level looks bad. Nothing would make me happier than to see SP arc upward, trend north, and break above the 13-day line. I’d be even happier if it confirmed, but I might still not buy more, not until I see significantly steady northward movement toward the critical 50-day line. A climb to and throuh the 200-day line, if ever, is probably years away, or at least not until well into 2010 or later if the company and SIRI in its current form survive.
Given SIRI’s near- to mid-term history a climb to and confirmation above even the 13d line is not a bet I would make right now.
I’ve also been watching the Bollinger Bands (20d at 2SD, and 10 at 1.9SD). When I checked yesterday after the close only the narrow band showed any promise, but it was tempered by the continuing trend–down.
If I had to guess, and that is all it is, then it would be that SIRI will be near a dime come time for the shareholders meeting (positive surprise nothwithstanding–PLEASE). This really is just supposition, but if it hits ten cents and the RS gets passed, and if Mel did a 50:1 (top of the range he’s asking for), then it would push the SP to only about $5 (which of course means no gain given the share count tradeoff). I would hope that after any reverse split SIRI would be at least $5 or more so (for however “short” a period of time) it gets lifted out of the penny stock bin.
I can’t wait to get hammered by the replies to this, but remember mine is a guess, only a guess, and nothing but a guess so help me God.
Will I pull the trigger again? I’ve been doing some what ifs. At a dime I can load relatively massively. But then there is the same risk we’ve faced since the merger, that the stock will continue to slide.
For now I continue to hold and monitor the buzz about the proxy vote. Still haven’t decided whether to vote yes or no to the requested measures. All along I have leaned toward no and still do; however, I want all the info I can get prior to the vote cutoff so that I feel confident about which way I go.
One more quick comment on SIRI hitting a dime. If I do buy then it will be to more than triple my current stake and average me down to near .70 a share. Even at .70, though, I would still have a paper loss on my hands. It’s a very tough time to be a long.
Buying while the SP is so extremely attractive is risky, but what if afterward the price reverses course? It would mean progessively less loss, possibly break even, and more remotely possibly put me in the black. But I’m dreaming.
Also from the upside perspective holding as I am carries with it the risk of missing an opportunity. But it is safer than buyng more right now. My inclination is to not buy until after the shareholder meeting and likely also not until we either learn for certain that the February debt WILL get handled, or until after that part of the ’09 debt is handled.
Wish I could look at the fundamentals and technicals (all pertinent upper and lower indicators) and offer some optimism. It’s just not there.
C’mon Mel. Investors and traders on the long side need you to include our interests in your decision making. The institutional wolves are trying for a kill.
Newman…
Well..I would rather see them go for it rather then any RS and share issue.Which no good would come from it anyhow at this share price.
If they can extend May and since Dec is not even on the horizon, it would be close, Assuming they have a good 4th, 1st and 2qtr.
That would be assuming a lot right now especially with the the big three being played like a political football,and the state of the economy in general.
A lot of damage is being done by both parties as to the stalling of the loans to the Big 3. People are not going to buy any of them, if they think there is a chance that car company could be gone in six months.
They should be encouraging confidence in the consumer to get that market segment moving again.
I do think it may be tougher then a 3rd and twenty, primarliy because the assumption is that all the cash flow will happen, but I do agree with you we have very little time.
imho
vaporgold
Newman…
Also, thanks for responding.
vaporgold