Show Me Don’t Tell Me – A Rebuttal
I recently wrote an article about how a Sirius XM share repurchase program might be in order. It was met with some skepticism to say the least so I thought I’d go into more detail and present a case.
Let me begin by making it clear that I in no way believe that Sirius should go into the open market on Monday and spend 100 million dollars on its own stock. Stock buy-backs do not work that way. They are usually stated by a company, that from time to time, and at its own choosing the company may buy back shares when it feels the stock is undervalued.
An immediate benefit would come psychologically from the mere announcement of a buyback program. A repurchase program immediately signals to the market that the company feels its stock is undervalued. Last month for example, Eastman Kodak (EK) announced a stock buy-back program and its stock shot up on that news.
The first thing that happens is that shorts run for the hills. The company is declaring war on short sellers by telling them that the downside is limited. Sirius would be signaling to the shorts that their profit-making days at shareholder expense are over. With limited downside potential remaining, most naked shorts would cover.
Overall growth is important, yet not as important as growth per share. As shares are removed from the market, per share earnings grow, whether or not revenue does. Each outstanding share becomes more valuable because EPS is increased right away. Think of this as another way of offsetting slow auto sales and retail growth.
A stock buyback program is a lot more shareholder friendly than a reverse split. There are value investors who look to invest in companies that are actively seeking to buy back their own shares.
As for the cash flow argument made by my esteemed colleague, I disagree. Sirius does not have a cash flow problem. Granted the profit is not there yet, but the cash is there and it comes in each and every month in the form of subscriber revenue to the tune of billions of dollars annually. Sirius common stock remains one of the most heavily traded stocks and as such, the asset remains very liquid. That to me is the key. At any time in the future should the company need to raise cash for such things as capital expenditures, it could very easily convert those shares back to cash, without increasing the float or taking on new debt. The shares are still logged as a cash asset on the books.
Position: Long Sirius.
I have a different plan…..Siriusxm and its CEO actually find his BALLS and launch a massive lawsuit against CNBC,JIM JIhadist Cramer and MAD FUCKIN MONEY! The damage that Mel said that Jim caused should be met with a strong response…..Other affiliates will think twice about bashing this company into bankruptcy….and news flash that is where this is headed…So get your heads out of your asses!
Parick..I hear you…you have been going off for 2 days with Jim Cramer comments that have nothing to do with the topic that has been presented.
This tells me that you want a place to vent your frustrations. May I suggest starting a thread on the SiriusBuzz forum so that others can comment on this very important matter.
Doing it in a non relative comment will not draw the attention the matter deserves. The forum is a much better place to start a discussion on such an important topic. You never know, Mel himself could comment on it there!
Dear Brandon,
I humbly think that wall street would shrug off such a proposal at this time. They know that in order to buy a sufficient # of shares to make a difference, the company would have to be in a profitable position.
Our goal, in my opinion is to cut costs drastically and show the many ways we are about to increase revenue. If one of the top management boys or Howard or Oprah would step up and purchase a million shares, it would be just as good as announcing a stock buy back at this time. Thank you for all your hard work and sincere interest in “our” company.
Dugie’s right, the street would know that it’s just a show. What Sirius should do is announce profitability. That’s right.
It would be a show too, and the street would see through it, but it would be harder to disregard. So, Mel, but ideally somebody other than Mel, like the CFO, should come out during the call and say that 2009 will be a transitional year with the two companies working on integrating and maximizing synergies.
Then he should say that they are laying off 400 to 500 workers (about 20% of the workforce) because of the synergies created.
And then he should say that they forecast an actual GAAP profit for 2010 and beyond with estimated revenue growth of 20% for the next 5 years and profit growth of 25%.
These numbers are just top of the head, but they don’t seem too hard to make and at this point, the company really needs to issue some HARD guidance. They have said that they will issue guidance at the call, but if it’s just soft crap guidance that we will get hammered. Crap guidance is saying “we forecast a profit in 2010 with great growth over the next 5 years” That’s crap…
Give the street numbers, all the numbers you have and all your dates and estimates. Even if they are bad, the mere fact that you are releasing them will be good.
Listen up ladies! If you people need to continuously cry about this stock sell it and buy a fucking bond already! If you hold it you will make $$$. Buy at 1.50 and avg down morons! If your so sure its junk then short it. By the way, why didn’t you sell siri and buy xmsr before the merger jackass. Because u don’t have balls! Get balls and avg down girls.