Sirius XM – Supply And Demand
A company through its effectiveness can only help to increase or decrease demand of its shares. The example staring us in the face is the recent conference call by Mel Karmazin. Unfortunately, despite many positives, the call helped to increase supply and weaken demand. I don’t think it takes a rocket scientist, or in this case an accountant, to see that the intention of the 2009, 2.0 million subscriber addition estimate by Mel was in fact just a low ball estimate, without any basis of fact. Mel even stated that the company was just basically throwing the number out there. The street however, focused its attention on that number.
Some attribute the decline to debt issues coming due next year, but the company did in fact lay out an exceptional plan to deal with the debt, without diluting shareholders. That should be looked on as a positive, yet the street is obviously nervous. Adding to that nervousness, is a sub 1.00 stock price.
What can be done now? There is only one answer. The company must increase demand for its stock, by ignoring the stock. It can only do that by executing its business plan, which puts the Q4 Christmas selling season on center stage. Q4 is historically the strongest quarter for satellite radio and with the new “a la carte” packages and “best of” programming offers being launched this quarter, Q4 looks promising.
This is a new company, only 40+ days old and it should be viewed as such. It is in this quarter that the company has the best chance of increasing demand for its stock, and increasing guidance in future calls.
Investors now have an opportunity to own stock in a company, with 2-3 BILLION dollars in annual sales and GROWING, for under a buck. Are you kidding me? Oil prices are plummeting and lenders have become more liquid in recent days which should boost car sales. The potential for upside surprises from the company has never been better. I think everyone can clearly see that. If we are all aware that the estimates given for 2009 are a low-ball figure, why then place so much importance on the number?
If the company can achieve its desired cost cutting and execute on sales, the stock will rise like a phoenix from the ashes. The growth of the company is real despite many headwinds. As Jim Cramer admitted at the prompting of Mel Karmazin, there is no other stock in the sector he’d rather own. The stock will catch up, but the days of day-trading it are coming to an end, and that is good for long term investors.
Positon: Long SIRI
Good article Brandon. I like to balance my pessimism with a healthy dose of optimism, and you captured my long term attitude about this company and stock.
But…I wouldn’t say the days of trading this stock are over. I think there will still be much manipulation of this stock for some time to come until as you say…Sirius and Mel show us the goods we have faith are coming.
BM,
Day traders are all over this stock today. When a stock trades in tenths of a penny it is an obvious indication of day-traders. So I have to partly disagree with your article.
I still do not realize why Mel would low ball numbers when he is trying to get banks interested in giving them loans. Unsecured loans are going to have a high price tag associated with them, though I suppose it really does not change much with the secured loans. I would think making your company look better would save you money on securing a loan, and definately make it more likely to get a loan than fork over more converts. And if they have to go the convertable route, those are going to be VERY expensive – and dilutive – for share holders…
Janco just upgraded SIRI to buy based on valuation.
I wouldn’t worry Newman. I mean if Mel KNEW he lowballed, he can show proof to the banks when he meets with them in private.
The big thing right now is the economic environment. I think Mel is just waiting on some good news to come out of this Lehman, Wamu, Freddie and Frannie shit storm.
My only question regarding supply/demand is why have they not done a better job informing the general public that they are now one company? Hell, I still see XM commercials on TV. It doesn’t seem like they know how to create any demand for their services.
You all realize that you’re now talking about a company whose stock is .89? …. The patient died friends, didn’t you get the card?
If ya kinda tilt your head a little to the left, and back away from your monitor, that graph looks like the head of a big arrow plummeting toward earth . . .
There is nothing that can convince me any different that this stock is being manipulated. Has this stock ever gone up on an upgrade? How many price targets are out there that are 200-400% higher than today’s price? Who is the LONE company with a negative price target? Do we really need to discuss this any further? So when the FUCK are we going to after Goldman Sucks?
Yea bonehead… this is all positive news.
Brandon, I try not to ask questions so please try to respond. I’ve owned the stock from $6 down to $2 and am thinking about once again avging down at this price. My only question is at what point do you see Chapt. 11 becoming a true reality? If I had confidence this was a true long shot scenario I would be buying again right now. Also how long can the stock stay sub $1 before it’s removed from the Nasdaq?
I believe a stock is delisted when it trades 30 consecutive days under $1. It is then placed on the pink sheets. That would be devastating.
Kevin…
You touched on a very significant point. Sirius’ last 10Q contained a statement that bk wouls be an option if financing was not found on good terms. The company could also be sold or acquired.
This is probably the sole reason for the depressed price. There is only one solution, and that is that the debt must be paid immediately, as Tyler said, to remove the overhang.
Once this happens, the stock should move up considerably (IMO). So it becomes a bet. Do you think they will secure the financing or not? I’m betting yes, so I want to be positioned for a rise in pps.
With the downside minimal at this point, I figure I have several months to decide.
SiriusXM investor….
WRONG!!!!!!!!!!!!!!!!!!!!!!!!!
After 30 consecutive days, the NASDAQ will send a letter that gives the company 180 days from that point to raise the price above 1.00 for 10 consecutive trading days.
That puts the earliest possible delisting at April of 2009. Although I do not think it will still be sub 1.00, if it is, the company will in fact be forced into a reverse split at that point. But give the Q4 season a chance.
Brandon, my thoughts exactly. If you did not know the stock price you would think this is a great investment. Everything is positive except the economy. And that has always come back. And even with that they are growing subscriptions.And what happened to Cramers comment that they are too late for the 2009 car market. With the best of both packages being available on current radios a new dual radio is almost immaterial. Watch the holiday numbers. They should be very good. I have SIRIUS for home and auto. I am going to buy the new XM portable with the best of SIRI when it comes out. Cool heads will prevail. Lets enjoy the up ride. I thought Mel covered every aspect of the financing. Which seemed very positive to a non-financial person.
Anyone know whether the inclusion of language to the effect that bankruptcy would be an option if financing was not found on good terms is merely “pro forma” language. That is, the kind of language that is currently put in documents either because it is mandated by a government agency (i.e., the SEC) or as cover your butt language to protect a company from “you didn’t warn us” types of lawsuits. For example, there is often language used in many companies’ documents such as “There is no guarantee that financing, if available, will be available and if available will be on terms satisfactory . . .”
Regulations on publicly held companies are constantly changing, and I wonder if this mention of “bankruptcy” is just a part of that overall regulation?
Here is the link to the Janco upgrade.
http://www.streetinsider.com/U.....82249.html
Steve…
This was the first xm included filing and the statement had more to do with xm’s debt. It was used at a time when the credit markets were on the verge of collapse, and at a time when the company was on credit watch. Those factors no longer hold true.
Point 2 is that Mel has publicly stated that bk is NOT an option and has backed it up by buying even more stock. To file would put Mel in prison for the remainder of his days.
Any company I would imagine would have to put that disclaimer.
Thanks Brandon!
Brandon: You are correct. Do you think Mel would have turned around and bought all those new shares after the merger if he planned on turning around and filling for BK?
Another thing: Mel mentioned at the conference that they have 100 million dollar payment that will be due in 2009 for their satellite, but also mentioned that they have 100 million credit agreement with Loral that has not been tapped. If they need the cash to pay off the Converts, they can always tap the Loral credit line to pay for the Sat fees.
I think this Feb convert gets paid off – in cash – by the end of October.
So this has been very frustrating for me like all of you. I am trying to figure out how and why this has happened.
First thing that comes to mind is Mel’s comment about SIRI being owned by unsophisticated investors. I think that is the truth. No other stock would see such capitulation. Retail investors feel the pain most, and invest with emotion. It is one thing to love a company, but that should not mean that you are attached to it stock. You should never love a stock. Do you love your checking account? So honestly I think this is a long-term opportunity, but who knows can the unsophisticated investor drive this down to .50?
Secondly, I think the problem with the banks lately is directly hurting stock price. Fannie and Freddie common stock holders will probably get nothing zilch. Lehman is flirting with the same process as Bear Stearns. While SIRI and LEH are very unrelated, I feel like the retail investor looks at this, looks at the stock price movement, and is like oh man I might lose everything I better sell at .86 cents! Are you kidding me!!!
The PPS is a very deep psychlogical movement. It would not happen in any other stock. And I really dont think that there is any floor for the PPS. I own 20,000 shares, but I am flipping out watching people sell at these prices and in such high volume. I don’t really know what to do, expect for drink coffee in the morning and beer in the afternoon and evening, and wait it out.
As I mentioned in previous posts, on Yahoo Finance, the bid and ask share amounts have been in low amounts (hundreds, a couple of thousands) for most of the past few days. They flash by quickly, there is a lot of trading going on, but by the quantities bid and asked at any one time, it seems like it is the retail investor (not the big boys) who are getting shaken by the recent conference call. (I just looked again: bid was 500 shares; asked was 800.) So, if my observation is a reflection of what is really happening, other posters on this website are correct in their observation that there is just not the will to buy at this point. And, with this, it is the “weak hands” which are getting scared off, with the resultant lowering of the share price. Hopefully, there will be a floor to the share price for awhile.
“I think this Feb convert gets paid off – in cash – by the end of October.”
Does anyone know if the Feb converts CAN be paid off early? Wouldn’t that require a potentially costly tender offer?
I just figured out how to reverse this issue. Mel should come out and with new guidance right away.
He could reason it that because this was not an official conference call or SEC filing requirement such as earnings, that the company did not feel it neccessary to be 100% accurate in its numbers.
It could state that the the intent was simply to demonstrate the growth aspect even if things stayed level, given the fact that this was a media event and not a true guidance call.
And if the converts are taken out, won’t the holding institution have to cver his short hedges?
Brandon-
In continuation of your thought, Mel could say: “It’s great to see so many analysts rating our stock a buy. And, by the way, the future guidance I gave on a recent conference call was being extremely conservative. Sirius XM has many wonderful developments in the pipeline, which I hope will make everyone pleasantly surprised.”
“2.0 million subscriber addition estimate by Mel was in fact just a low ball estimate, without any basis of fact.”
What? Brandon your an IDIOT 3.179 Million combined net subs in the last full year. near 4 million combined the last 4 quarters before that. Increasing Churn, Dual subs converting to one. Retail DEAD. OEM may not be ramped up this year while OEM’s wait on interoperable receivers.
No basis in fact my ASS
Hey, Mel should buy a substantial amount of shares at these levels with statement saying….thanks guys for the cheap shares. Now that would surely make headlines.
Brandon, put your thoughts on the follow-on guidance from Mel in an email to Mel (and others in his circle, in case he is too busy) and send to him at near light speed. Also, good article! Refreshing, and validates my move to investor from trader. Regarding buying right now, I’m looking in all my cubby holes for more discretionary funds so I can buy and average down more. –Long SIRI.
New guidance would be good, but Mel also needs to secure financing now to pay the Feb converts. He doesn’t need to pay them now. He just needs to assure investors that he got the loan. That said, Mel can take $400 million out of his own piggy bank and do the deal. $400 mil is a drop in the bucket for Mel Karmazin.
Now it would be better if Mel could get buy back the convertible shares now so the MM’s would stop shorting the stock.
Good question from Winagain:
Does anyone know if the Feb converts CAN be paid off early? Wouldn’t that require a potentially costly tender offer?
One more thought than back to the office. Leads and lags. Don’t forget about the lag time between positive news about and actions by the company and the time when there is a corresponding impact on the SP. Also, weighting of the volume of good versus bad. The volume of bad news about the SP carries greater weight than good news–but remember lag time. How long do you think it will be before the good news to bad news ratio will start tipping in our favor? Now back to work….
Retail investors like us do not buy stocks in tenths and hundredths. That is exactly what is going on today. These are all manipulative trades.
I am in shock right now, on the 70’s channel the DJ just plugged the new Ipod. What the fuck????????????????????? was that about???????
Anybody know where COS1000 can buy a cheap pair of steel-toe shoes . . . seems he is out there still trying to catch that falling knife . . .
btw, whatever happened to that pump-&-dump specilist “163888,” hmm, where is he now? haven’t heard anything . . . probably out there pumping WaMu or Rite-Aid on the next batch of “unsophisticated” investors.
Just for fun COS, lets see where you would be 1 year from now if you liquidated your SIRI position and moved into MBIA. 1 year not long enough? ok, make 2 years, 5 years . . .
Market buys and sells will get executed in tenths though although we can’t place a limit for anything but a whole#
Why hasn’t Sirius issued a 8k concerning the
results of the $550M bond redemption. It
would be a Material event if the Bond Holders
did not redeem???.
It’s been a week since the redemption deadline.
That would mean Sirius is sitting on $550M in cash plus the cash they had at the end of Q2 $50M this would be extremely critical information to know and would help the share
price considerably.
correct last paragraph
That would mean Sirius is sitting on $550M in cash plus the cash they had at the end of Q2 $450M this would be extremely critical information to know and would help the share
price considerably.
Reading the intelligent responses on this board is so refreshing after looking at Yahoo’s. Keep up the good work Brandon.
OMG another plug on the 70’s channel. Now the DJ says the new Ipod does everthing but take your garbage out. Does that mean SiriusXM may be on the new Ipod? What do you make of this Ipod plug on the SiriusXM 70’s channel?
probably just some dumb DJ.IMHO
Unless that was a strategic move and authorized by Mel, if not, Mel must be seething.
Horsecock:
The Sirius $300 million (Feb2009) and the XM $400 million (Dec2009) have a “no early buyback” clause. Neither Sirius nor XM can buy them back before they mature.
There is also no point in buying them back now…the interest has mostly been paid already and if they were callable (not sure) the premium required would not be worth paying.
They just need to secure the financing, possibly put it in an escrow account, and release the details.
I feel Siri is a bargain at this price. Risky but a good speculative stock no less. Google is another good buy at this level as it dipped to under $407 today. I also like BAC, UA, and GEOY, but am looking for more of a decline in their stock prices before buying. My portfolio is top heavy in SIRI so I am hurting like the rest of you. However I am choosing to wait it out. I paid .68 for a small portion of my shares back in 2002 only to later regret not buying more at that time. However, my current cost basis is $2.17 and I am considering dollar cost averaging down. Not sure what to do in this market.
Sirius,
You say: “Retail investors like us do not buy stocks in tenths and hundredths. That is exactly what is going on today. These are all manipulative trades.”
Not both ends…my purchase yesterday was at $0.9656, even though my order was placed at not to exceed $0.97.
Steve, in answer to a question you had (way up this blog), I finally figured out the answer to the question, which also had been bothering me since the drop below $1.00, why are the bid and ask volume listings so much lower than they used to be….
answer: we are now trading in 1/100th’s of a penney rather than full cents.
when we saw the volume before there was more volume for each bid or ask because there was less spread of different prices.
it is more or less an optical illusion, which is confirmed by the volume totals for the day.
Sirius Roadkill, why the are you so concerned with what I do. You are a boring individual that continuously adds nothing to the discussion. PISS OFF.
pssssssssssssssssssssssssssssssssssssst in your general direction cos
Sirius Roadkill, are you a nim-rod or what how many times have I said I am 163888 at Seeking Alpha. I have aready said that Seeking Alpha will not let me post there again, because VicDave complained that I was reposting his original comments to show how he lies and told him if he did not like to look like a fool then he should just stop typing on Seeking Alpha because I am just using his own words to make him look that way. It is Seeking Alphas policy that you cannot repost other posters comments or tell others they should not post on there site.
Now as for your dumb comments on Seeking Alpha you have made. It is obvious to most that have been investing in the market for sometime that SIRIXM PPS is not reflecting the correct level that it should be. I have given many reasons before here. I also explain this in the forums under “Why all the frustration”.