SiriusXM Remains Bullish
SiriusXM dipped down into the $3.30’s, but did not hold that $3.41 that I wanted to see it hold. Despite that it is still bullish. We have no warning flags, and one caution flag on the EMA’s. The caution flag essentially went up because the close was below that $3.41 I was speaking of in the last update.
The holiday weekend took some of the thunder out of the car sales news, but perhaps that is for the best after all. I am anticipating that the company will have a good quarter and that the focus will be on how many shares that the company has bought back.
One thing that makes me nervous is that Liberty Media may soon be participating in the buybacks. If Liberty makes a big deal about it, it can be a positive. If Liberty does it quietly it can be a slight negative. Consider this:
If SiriusXM were to be a buyer of 1,000,000 shares of its own stock, it would normally be buying those shares on the open market. That would support the share price. If SiriusXM were to buy 1,000,000 shares with Liberty participating, then the open market portion would be 500,000 shares. That means that there would be less support provided in the open market. Bear that in mind as we approach the point in time where Liberty may participate.
The biggest reason Liberty has not participated up til now is that they want to be able to select the lots they sell for tax purposes. Liberty needs a year to pass so that they can sell the highest cost basis shares first.
What we want to see is this equity moving up on volume of over 50 million shares, and eventually above 60 million shares. We want to watch $3.36 closely. If it touches that we want it on lower volume.
Support is at $3.36 and then $3.29. Watch $3.36 closely. If this equity does happen to break below $3.29, the $3.25 is likely in the cards. A move above $3.40 will allow a test of $3.50 in the next week or so.
The EMA’s are all bullish with one caution flag that can disappear if the equity can close above $3.40. Stay tuned.
Volume
Support and Resistance
Exponential Moving Averages
And, what about if Liberty does not sell back its shares to Sirius XM as part of the SIRI buyback but instead sells them into the marketplace. Wouldn’t that kind of cancel out Sirius XM taking shares out of the available float?
Liberty has no reason to sell into the marketplace. It would be counter-intuitive to their goals and agenda
So, if SIRI, without the participation does the entire $2 billion share buyback, you think it is most likely for Liberty to get SIRI to add more debt so that SIRI can buy the Liberty-owned stock at that point? I assume this is correct, but just wanted to check in with you. If this is so, would the additional debt be enough to cover all the shares that Liberty wants to sell? Also, legally, does Liberty have the right to have Sirius XM take on additional debt to allow a single shareholder (in this case Liberty) to sell its stock privately without opening up the buyback to others who want to sell. How would the share repurchase price be set?
Sirius XM already has added debt and the credit facility and can use it for added share buybacks. They simply (IMO) have not announced it yet. The debt will not go over about 4 times EBITDA. Right now that is a debt ceiling of about 4 billion. The reason it will not go over is there are covenants on the credit facility. Liberty can do a deal with Sirius XM to buy back shares, but IMO it will always come with a component available to all shareholders (50/50). This way Liberty maintains its ownership percentage.
So then, in order to attract shareholders other than Liberty to sell enough shares back to Sirius XM to allow Liberty to maintain its over 50% ownership Sirius XM would have to offer a premium over the then current share price for shares to be sold directly back to Sirius XM (as opposed to in the open market); otherwise, Sirius XM would have to purchase shares in the open market and do a private buyback with only Liberty. I agree with you that the buyback would be offered by Sirius XM shareholders other than Liberty, so as not to act in a way openly favorable to only one shareholder.
It should say “offered TO Sirius XM shareholders (in the last sentence).