Sirius XM: Show Me, Don’t Tell Me
The premise seemed simple enough. There were supposed to be enough fixed costs in SDARS that the addition of millions of subscribers and the addition of hundreds of millions of dollars in revenue should lead to prosperity. Each and every quarter brought with it however, higher revenues together with higher operating costs and expenses. With each passing quarter, cash flow break-even has only inched its way towards reality.
Sirius XM very well may be free cash flow positive in the near future, but the street doesn’t seem to care and to tell you the truth, neither do I. The company has cried wolf once too often. No one believes it anymore, and the sheep are being slaughtered.
I happen to be one of those sheep. In my opinion, there are certain events that are going to happen near-term which will be positive for Sirius XM shareholders, but I don’t think it will be enough. I have heard from Mel regarding the number of subscribers being second only to Comcast. That’s an advertiser selling point. It would appear to me that the near-term plans to improve the balance sheet are well under way. Higher ad revenue and cost cutting seem to be of most importance.
But can the shareholders afford to wait? I doubt it. As the short sellers on Wall Street continue to manipulate the stock and spread rumors that go unnoticed by the Securities and Exchange Commission, the stock continues to make new lows. With every new low comes yet another doom and gloom article by the Motley Fool or the Street.com, or statement by Jim Cramer. Investors are fearful that they will ride the stock down from 1.50 to 1.00, only to see a rise back to 1.40 on any news. The company is giving no real reasons to own the stock right now.
Recently, XM announced a buyback of some of its outstanding notes, and the street had no reaction. In my opinion , a common stock share buyback program is imperative at this point. If there are in fact 400 million dollars in synergies going forward, how about putting 100 – 200 million of that up to prove it. Let’s face it, if the company believes that the stock is undervalued, would it not make sense to buy the stock for the company treasury at this low price? After all they just lent out hundreds of millions of shares for UBS and Morgan Stanley to short against. It would also be nice to see some insiders like Mel and other board members put up a few more dollars of their own money to raise investor confidence. I believe the company MUST do this, and do it soon to salvage what is left of the stock price and raise confidence that a bottom has in fact been made.
Real people are getting hurt….I reccomended this piece of shit to my twin sister and since then i reiterated the assesion that this is going to happen and we will make some equity….I have never in my life seen a situation….{by design) go so badly and my relationship with my twin has been damaged. Orbitcast holds major resposibitity in this….And are you fuckin telling me that there isnt one big surprise from mel fuckin karmazin….Not one in 17 months….I really have lost soo much money in this i dont know what to do….And the institutional vultures are just eating it up…and are dumping those 350 million in shares!!!!Dont tell me that they aren’t
I CAN TELL YOU THIS RIGHT NOW….IF THIS COMPANY GOES BANKRUPT IN ONE WEEK….I WILL BE FILING A LAWSUIT AGAINST UBS AND MERRIL LYNCH FOR DEPLOYING THIS SCAM AND DESTROYING TWO COMPNANIES….MAKE NO MISTAKE
Great article. You said it better than I. Mel has been giving to much lip service this week. Thursday, in my opinion, is the make or break conference. If he does not line up his ducks on Thursday, we investors are doomed.
This, is the first “real” article I have read regarding shareholder extinction. Thank You.
The more the price goes down, the more I will buy. The more pain we feel now, the greater the reward will be for those who stay in. If you can find another stock for 1.46 that will quadruple in the next year then sell this and buy that. Otherwise, stop looking at the price… Unless you are a masochist… In which case, maybe you should spend your money in an S&M club.
I don’t know how you can advocate a share buyback before the company earns even one red cent. That makes no sense to me.
As for those that have lost money (including me) you have a choice, ride it out or sell and move on. But its silly to blame Mel or this company. Honestly, the mistakes that were made were not Mel’s- i.e. over paying for content, etc. Mel is doing everything he can to get this stock and company back on track. Merger is a major part of that plan and he got it done.
Brandon,
Does Mel have any legal recourse against Cramer or CNBC?
I am beginning to believe people on the inside (SIRI/XM) are in contact with big investors, and Short sellers. It is hard for me to continue to believe that Mel K has done nothing for investors that he has publicly stated.
Something about this deal is really stinking. I have lost a bundle, and will make a final decision during next week to run or not.
It may be time to accept that the stock was manipulated by those in the “know”.
As bad as I hate to watch them rant and rave because of my money, I may just accept and move on.
So now we have one more basher, “Sirius Buzz!” I understand what happened here. Apparently in your fragile emotional state your brain has shut down! We have a monopoly! Get it!? Many of the problems and costs you speak of were due to early startup expenses and promotions before Mel was CEO. The balance sheet has steadily improved since the arrival of Mel!
Many times I didn’t think Mel would pull it off. I think in this market, with all the forces that ran interference and the huge sum of money spent trying to stop this merger, that Mel did one hell of a good job.
This company has huge prospects. I wish we could have had a better financing deal but I fully understand how everything went together and the timing.
So congratulations to all that have the foresight to see through this current financial fog to a bright and profitable future.
For you and those that don’t know how to invest to preserve capital, or understand the history of why Sirius XM is where it is, you need to sell and get out. Why bash because your feelings are hurt and you overestimated the length of time it would take to see a return? This site is off reading list.
PS You can have Faber all day long. He is an insulting and disingenuous ass with a disdain for Mel and Sirius! Faber is just another unaccomplished jerk!
Chill out dude. It will work out; as long as SDARS works out. XM was buying back their debt with the money SIRI raised. Officers should be able to buy stock after earnings. (and after they examine XM’s books).
Lessons learned. Don’t but unprofitable companies. Short on mergers that involve stock, especially if there is debt involved.
ARRS is coming back after their merger with converts, but their profitable.
Joe Paul Clayton, ran a SIRI printing press churning out stock at $1. Until about this May, that worked out. He was determined not to take on debt, like what happened at his prior job at Global Crossing.
Mel should have used GS as his bank instead of ML and UBS. That was his mistake.
And he should have sold stock last year to raise money. He underestimated the power of GS.
Great Article Brandon-
You should forward all your articles to mkarmazin@siriusradio.com to make sure he is listening to you. I sent your article(s) to Mel Karmazin and of course no response from him. I agree that Karmazin, Donnelly, Greenstein, Frear and Meyer better start fighting back with more ammunition than advertising points or else they are in trouble. They should make sure the SEC is aware of the naked shorting in their stock, and have them enforce REG SHO for them. They also better show some confidence by buying some common stock themselves or in a buyback to show their confidence in the common not gettting wiped out. I own 15,000 shares in thr $4 range and am bothered by what is happening, but have no intention of selling even if it goes to zero.
I will however start to plan a lawsuit against those that have conspired to force this demise (if it happens) upon them. I think Mel Karmazin is very talented, but he better start doing more than talking as you said, and make things happen. If he would purchase another $10, $20 or $30 million of stock like he did way back when, believe me, many investors like myself would then feel confident to average down right now. I will not add another penny to this investment gone bad until Mel Karmazin buys some more himself. Remember, the Captain of the ship theory is he is going down with us.
I appreciate your efforts Brandon to keep us all informed, and to offer up opinions and ideas that make sense, now you only have to get Mel to listen to your ideas and opinions.
I am in it for the long haul. I bought more at $1.50 and will buy more if it drops to $1.00. So far I have been able to lower my avg cost to under $3.00, which is what I think the company is worth at this point, and a price we might see in the next year.
Whether to ride out this price drop out or sell is a personal choice. I do feel bad for people that for financial reasons can’t wait it out and have to sell at this price
Tyler/Brandon:
In my opinion Mel must buy 2 million shares on the open market Monday morning with his own $ to prove his conviction. He bought a few days after he was hired by Sirius and bought again a year or so later, but no inside or personal buys since then.
If he does this, I believe the stock would jump over $2 in minutes of the news breaking, reversing the short selling and margin call selling & bailing many out temporarily until CC on Thursday.
What do you think ?
JM, I agree. Mel made $32 million what would $2 mil mean to a guy that is worth at least $100 million.
rjr,
It’s not unusual for companies with positive cash flow but no actual earnings yet to have an buyback program to reduce the float. Makes more sense to do it when the price is low rather than when it takes off due to positive earnings. Its all a question of how much cash they have, how much they need to fund operations. One way or another excess cash is supposed to go back to the shareholders.
Great! We can all debate this. For starters no one is more bullish on SiriusXm than I am. I am also very aware that the media is targeting Sirius. How many retraction articles were put out yesterday, after the damage was done? Did you see that post regarding Howard Stern being laid off? How about the numerous false posts regarding “Mel being investigated.”
There are people trying to drive this company into a nosedive through inuendo and propaganda. I am suggesting that Sirius MUST fight back NOW! Waiting for Q3 results to mount a counter attack is a bad idea. WE need immediate action.
Good Article. Right on the money.
This stock is Dead Money for years. I also agree with some of the other posters such as LS Larry. This stock will be shorted in the future for years to come thanks to Mel.
I also agree that the latest stock offering was a set up and only the big boys will make money when they decide to run it up, short it, run it up, short it again, and on and on for years.Exactly like it’s past performance.
The bottom line is this stock is no where until Sirius makes real profit each quarter and every quarter period. Services the monster debt they have, and begins buying back all the shares they have floated killing all the long term small investors of Sirius.
You can hype this stock all you want. But until this happens which will take at least three to four years and maybe longer, you are better off getting out as soon as you break even if you can and come back later.
Currently this company operates as a non-profit producing stock printing Pig.
Vaporgold
My break even point is $2.76 x 100,000 shares. As you can see, I’m out a large sum of money. Put the company up for sale so most of us can recoup some of our losses. I’ll be happy with $2.50 just to get out. I’m sure many are in my position or much worse.
Let everyone bash away! The lower the price goes the more I can buy. If you don’t need a quick buck then the share price is irrelevant right now. If you believed in this stock at $3 then at $1.50 it is a bargain. At .99 and under it will be a steal.
I wanted to be able to brag that I only bought SIRI at at the lowest possible price before it steadily went up. This point is long past for me and many others.
So now I am going to go for the bragging rights of having XXXXX amount more shares… which will be a lot more to brag about in a year or so.
I have been hoping for a stock buy back for about 2 months. I understand that a small buy back will be just a drop in the bucket, but I think many of you will agree we could use a few drops.
How about this scenario…
Announce with 3rd Quarter Announcement. This will have a few advantages..
1. Can still get in at 1.50 range
2. Momentum from announced synergies
3. Momentum from vastly improved balance sheet
4. Momentum with guidence for 4th Quarter (Holiday).
They do NOT have to buy it back now…we all know they just need a “plan”
All they need to do is announce a plan to buy back something like..
1. 2009; 1,000,000 shares
2. 2010; 10,000,000 Shares
3. 2013; 100,000,000 shares
4. 2014; dilution reduced because the 183M shares are due back…
The crux of this problem is the 73M shares that will go for sale from time to time…I just don’t understand that if a positive cash flow tidal wave is going to hit us in 2009 and probably double in 2010….why are we printing more shares….
I think simple announcement of buy back sends the signals that drive the company up from the 1.50 range into the mid twos and maybe higher…
thoughts?
I don’t see any WIDE SPREAD articles out there
condemming the damage that Jim Cramer’s
antics did to the shareprice !!!!!!
He should be held accountable for causing the
selloff which resulted in Sirius having to
close the deal at a lower price than anticipated.
Can Sirius Sue CNBC and Cramer on behalf of the
company and shareholders for that travesty ??
Quick Poll: Who is right? Brandon or Tyler?
https://siriusbuzz.com/forum/showthread.php?t=614
FWIW, profitability does not have to happen before a stock-buyback program can start… however, positive cashflow does. The $400 million in synergistic expense savings is great — but that doesn’t necessarily translate into $400 million in new positive FCF. You cannot buyback stock on profits — you can only do it with positive FCF. A company can have huge amounts of profits — but negative cashflow and still go bankrupt; but at the same time, a company could have negative earnings and positive cashflow — and stay in business for a long time.
Here are the numbers:
With the completion of the merger and XM’s mandatory debt repurchase — I estimate that XM has approximately $220 million in cash on hand; plus the additional $150 million in GM credit facility available. That combines to $370 million in total liquidity. (Including refinancing fees) I came to that figure by adding…
$183.8 million cash as of 6/30/08
+ $105.4 million left over from debt refinancing
+ $150 million GM credit facility
– $69 million in refinancing fees
= $370 million total liquidity
For Sirius, they ended Q1 with $252 million cash and had approximately ($40 million) in FCF during Q2 (total guess). That would leave them with perhaps $212 million in total liquidity.
Added together, the combined company has approxiately $582 million in total liquidity. If you turn around and spend $400 million of that on a stock buyback program — that would leave the company with less than $200 million in liquidity to operate the company on. And Sirius will easily need that much in the coming 18 months for their satellite replacement program (CapEx).
There is no cash for share buybacks… not now. That will not take place until 2010 (maybe) or 2011 (more likely) at the earliest.
——
They do not need to buy back $500M shares to get moving in the right direction. I would be happy if the company bought back 1 share at this point.
Brandon is right – We need profit each and every quarter. Not just CFBE or a little CFP. we need decent profits each and every quarter. You know, like a real company
vaporgold
I think what’s being missed in catching up on the conversation above — is that people are equating the announcement that the company would have positive cashflow in 2009. What you’re missing is that that is BEFORE CapEx spending. Sirius is launching a new satellite in Q2 next year, plus in constructing another satellite to be delivered in 2010.
Their satellite replacement program is costing the company approximately $900 million in CapEx, spread out over several years. I estimate that they have paid approximately $250 million of this so far — leaving them with costs of $650 million yet to go… spread out over the next few years.
But the big cost is going to be that launch next year. I watch 3 of XM’s satellites get launched — and watch their costs. Sirius will be dropping well over $200 million in CapEx next year.
Plus the combined company must re-finance Sirius’ $300 million convertible Note (Due March 2009) and XM’s $400 million convertible Note (Due December 2009). On top of working out a deal to extend (if not refinance too) XM’s expiring bank credit facility, which is another $350 million (Due May 2009). This can be extended, but the others will need to be refinanced… to a tune of $700 million.
Announcing a plan is good… yes. However, they have to have cash available to do it. The Street knows this and would see right through a plan if it is too aggressive.
With $582 million on-hand and the need for to burn at least $200 million on CapEx… not to mention all the costs in closing the merger going on right now and the FCF burn going on during the rest of 2008… this is not the time for share buybacks. Especially when they’re going to be issuing at least $700 million in new debt in the next 18 months. The Street would see it as increasing the debt to buy back shares (for a company that is already greatly levered).
——
jdare77
This company needs every dollar it has right now… it’s still burning cash for at least the next 18 months.
A company that has negative FCF and continues to keep issuing new (even if it’s refinanced) debt, should not be buying back stock. Not right now.
—-
Buyback with what? I don’t think that is the answer here. To get back on track we need new prodicts like receivers that get both services hanging on retail hooks and the content needs to be merged. Then advertise and grow. If you got hurt by the stock going down you must have sold. Why did you do that when the merger just happened? Were you expecting an instant pop? I didn’t expect it but I sure did want it. I think this company needs to get down to business then let’s see where the share price is. There are going to be many people trying to destroy this company funded, no doubt, by the NAB. They lost but they are bitter old pricks who will stop at nothing. I do owe them a great debt for letting me know how good satrad is and will be. Their fear taught me that. I am not buying into all the negative sentiment that is festering everyplace like a biblical plague. I see the potential and hear it every time I turn on the receiver in my car.
Tyler, LOL, I just read your “response”… I guess we’re on the same page because I just posted the same thing here.
Brandon,
I love your articles, your enthusiasm and your dedication to Sirius/XM and the website. However I disagree with you on the stock Buy-Back at this time. Its way too early in the process to think about this yet. I would much prefer Mel to buy a million shares on the open market, that would provide a tremendous boost to us tortured longs. Peace to you and Tyler.
Homer, I do not disagree on the fundementals or technicals of how to run a company. I’m trying to find a way to show the investors that there is hope.
CNBC, Cramer, and various other news sources have driven this company down on negative news that was for the most point always known. Alot of the “news” wasn’t even news. And what bothers me the most about the recent run on media…whenever a positive story was posted, the street, cnbc, Cramer, or all of the above had 2 negative stories ready to run….
There is a lot that is misunderstood about the past few weeks right now… the best you can do is turn off your computer or sell calls and make a buck off of it.
Read the articles, they’re written to make the read think that XM issued $1.2 billion in MORE debt and that Sirius sold and rasised shares worth $350 million in additional capital — and that the two have $1.1 billion in maturing debt next year… I’d run away if I were a prospective investor too.
What was missed is that XM bought back $1.1 billion of OLD debt with the placement above and the Sirius $350 million in shares was a loan program used by Hedge Funds who have to give it back; and finally, Sirius and XM do have to refinance $700 million in maturing debt next year — but the credit facility can be extended. Not as bad when you look at this way? Well none of the financial writers were able to figure it out…
…hopefully Karmazin and company can explain it next week a little more clearly to them.
One side note I just noticed… XM and Sirius previously traded hugely over-valued, when compared to their Book Value (P/B Ratio). Sirius, for example, had a book value of ($0.56), while they traded at $2; while XM’s was ($3.43) and they traded at $10.
The current Pro-Forma Book Value is approximately $1.62 — and the stock is trading at $1.46. In other words, it is undervalued… for the first time ever. I wonder how many on the Street actually looked at the Pro-Forma condensed financials of the company filed last week?
Given the fact that the Street had routinely overvalued this sector as individual companies — the fact that is undervalued as a merged company is interesting. Interesting because, if they can demonstrate some of what they’re claiming… then this undervaluation will likely correct quickly.
—-
Brandon, the thing I don’t get about this article other than the share buyback which makes no sense at all is why you have changed your tune as if to say that you expected cash flow as soon as the companies were merged. It just doesn’t make sense.
To me, this whole article is you bitching about 1.50 share price.
Also homer,
Do you really think anyone values this on book value?
The apropriate metrics should be a multiple of cash flow (at least ~20 times cash flow for a growing company), or EV/EBITDA of at least 10 (again for a growing company).
If you think the stock can generate only 200 million in free cash flow in 2010 then that would warrant the current price. That’s really the only way I can justify this price here… No growth beyond 2010.
If you think Sirius XM can generate 1 billion in cash flow excluding 1 time items by 2013 then that implies a market cap of ~20 billion compared to 4 currently. Then just discount that to today at whatever discount rate and appropriate risk factors and you have a price today. Unless you think that all americans are going to ride their bikes to work and the take rate is going down and churn up then sirius is worth more than they are today.
In my opinion they are priced in a worst case scenario currently. Can anyone think of any more bad news other than they aren’t getting their synergies?
SI…
I am very concerned with what I percieve to be an attack on my stock. I’ve never backed down from a fight and I don’t intend to start doing so now.
How is it possible that the company can buy back debt, yet not have money to buy back shares?
Buying 100,000,000 in stock back at 1.50 permits the companies books to grow as the stock price grows. If the stock does go to the 4.00 merrill is calling for, then sirius increaes its value by 300,000,000.
Sirius must not sit back and let these market manipulators make bk allegations without a single offering of defense.
Brandon,
If you buy back 200 million in debt then you are automatically forcing those people to cover the shares they shorted against it so it serves a dual purpose.
I understand you wanting to do that but I think it’s wiser to pay down debt so that people don’t get parts of your company at a discount and inflate the share count when they convert.
Also, you avoid interest and you have to pay down your debt at some point… I agree with homer and tyler about debt over shares…
So basically everyone else is of the opinion that Sirius should just sit back and let the manipulators turn Sirius into a penny stock. Do you really think the NAB controlled media is not behind such things as “Howard Stern Laid Off” Do you think they MIGHT still be playing the game..
If you don’t subscribe to that theory and are under the misguided belief that terrestrial radio will now lay down and die, your opinion then is to wait until the stock goes much higher before buying…How does that make sense? Why would anyone wait for a stock to go up before buying it? It needs to be done.
Brandon,
The Howard Stern article was a satire news article, wasn’t it. That shit happens all the time and I don’t think anyone has paid attention to that, but I understand where you are coming from.
We do need analysts to come out in defense of this stock on Monday to at least get it above $2 for now until Mel & Co speak on Thursday.
Margin calls are out of control right now on XM converts to Siri.
Mel MUST buy on Monday – 2 million shares at market to show his conviction and beliefs, more than words !
If it’s his $ again, then it will have a huge impact, even though it’s not many shares in the grand scheme of things.
I sent him a personal e-mail to plead for him to do it to save this stock from the continued free fall. We need an injection before Thursday and it needs to happen early Monday !!
Brandon,
The only way this turns into a penny stock is if people sell because it’s goign down… Look at the valuations! It shouldn’t be here, so don’t sell… once the panic momo traders get out we’ll be fine.
Look at the cash flow and ev/ebitda valuations like I said above. Those are the low multiples too because we are in a shitty market.
One last thing. We haven’t heard from many of the analysts yet and the ones that you’ve heard from agree with you so the right thing to do is probably accumulate instead of trying to pick tops and bottoms in the middle of the day.
Sorry for spamming instead of posting in one post but I have another though.
If you had invested pre merger approval expecting a big pop then you are a weak hand… very easy to shake and rattle. These people are largely gone and I think there’s still some who remain.
Now, the people who invested pre merger approval who held it because they saw good value should still be holding because the valuation has improved over what it was before, especially if you take into account what some of the merger approval percentages were that people were usign to value the company. They also had refinancing risks built in.
Now perhaps the refinancing was uglier than expected but the merger approval risk is now gone so at worst they should be offsetting but in reality if you look at the reports the merge price was far above the no merge price so really 70 million in interest a year doesnt mean anything.
All in all I find it kind of stupid that the lowest price to invest would be after merger approval and I’m sure it seems stupid to all of you too. The debt refinancing wasn’t that bad and really it should have been expected. The markets are efficient, they understand the value, they understand that weak hands will sell and they understand they can get cheap shares. So hold and forget it until you see some of the value that the merger will bring.
People selling now because of 70 million interest expense are fools.
The growth is continuing, the penetration is increasing, churn should improve with pricing plans, ARPU might go down but if it does the proposition will still be accretive because it would have meant that many more people sign on (meaning you get more reveune for the same SAC).
I am of the impression that this could be near the bottom of car sales. People will always need new cars, they will buy cheapers cars.
Bottom line: once the car sector shows any signs of improvement or even moderation of the slowdown then siriusxm’s position will improve drastically.
Brandon. You are on the right track! All the ones that thing buying later at a lower price are as demented as anything I’ve ever heard in my life. You really ought to consider what a penny stock looks like. Cause we have it. Keep up the good effort, Brandon.
Socal
My broker friend at GS told me to take advantage of the current stock price. He bought last week for his personal account, and he doesn’t expect it will stay this cheap. He was very happy to be able to buy at such a discount and even sold other positions to buy. He’s also expecting Mel will give investors some very encouraging news this week. He believes the share price will move back over $2 after the earnings report and says smart shorts will cover ahead of earnings.
Long over 400k shares and buying more.
SiriusIntentions
That is exactly my point — there is no reason for this stock to be below book value right now.
For years these stocks appeared to have an inflated book value because (IMHO) they undervalued their FCC license and bandwidth. And now finally, they’ve reassesed this and have appropriately valued their bandwidth/licenses. This greatly increased the book value of the company — but now the market value is below book value. This is something that is going to change, IMHO.
But before that happens, Karmazin has to demonstrate the cashflow abilities of the merged company first.
My point? If the company went bankrupt tomorrow and was liquidated — there would still be enough left over to give the shareholders $1.62 for each share.
The current valuation is insane.
——
Hi Homer,
Please can you explain something to me.
OK, I think I understand the concept of the share lending program – guaranteeing placement of the $550 million in XM notes. What I don’t get is why MS and UBS – the “share borrowers” – are forced to sell the shares they borrow at $1.50?
Also, in hindsight do you think Sirius would have been better off selling the notes at a higher rate of interest and NOT offering the hedging facility? In light of the negative and erroneous articles characterizing the share loan as a dilutive offering, not to mention the profound sense of betrayal felt by stockholders who expected a short squeeze after the merger approval only to see Sirius shorted even more, I think the share loan ended up “costing” the company a helluva lot more than they saved by way of a lower interest rate on the notes.
I have a question – someone please help – – I am long too much (more than I’d like to say – -). I read the following that if we liked it at 3, then all the more we love it at .99 but I’m frankly getting spooked out here not because I cant wait – I can – but because of the future I now possibly see more clearly in terms of future dilution – – I see the following post and wonder how the merged co will pay this without massive dilution – can someone please explain:
Plus the combined company must re-finance Sirius’ $300 million convertible Note (Due March 2009) and XM’s $400 million convertible Note (Due December 2009). On top of working out a deal to extend (if not refinance too) XM’s expiring bank credit facility, which is another $350 million (Due May 2009). This can be extended, but the others will need to be refinanced… to a tune of $700 million.
Jeff, it is important to know that Sirius didn’t set the price at $1.50, per se.
What happens, is that Sirius loans the shares to UBS/MS for a nominal fee (which incedentaly is $0.001 per share… or about $262k). UBS/MS then use them to loan to the hedge funds to short… they even found buyers for them. The problem is, hitting the market with 183 million shares (initially) with another 80k waiting in the wings), it’s going to dilute the marketplace. The $1.50 was the price point in which UBS/MS felt they could get enough buyers for the new shares. Sirius had little say in it.
I understand the betrayal part — however, how much will the lower Coupon save them? Likely at least $33 million annually — over 6 years — we’re talking nearly $200 million.
Short term pain, long term gain.
The fact is, anything under $1.62 is below the book value of the company now. That is historically not normal. How is that these companies can trade at 4 times their book values as individual companies — and now, UNDER the book value as a combined company? It’s insane. I don’t see it lasting… and I don’t make pps predictions very often.
Right now we’re wittnessing shares being shorted — and merger traders getting out, killing this stock. Gonna take some time, but this is just my opinion… and I’ve been very wrong on this stock. Remember, I held XM when it was at $40 and didn’t sell it until it hit $25.
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Homer – why do you say it’s trading below book value? I’m confused. When I look at the balance sheet, I see a non-existent book value, a negative equity. If one were to hypothetically liquidate, there’s nothing left over (there’s a deficit unpaid), so where do you get your calculation of a book value and how?