24/7 Wall St.
10-27-2008, 06:20 PM
24/7 Wall St. Daily News
http://www.247wallst.com/images/2008/10/27/sirius_logo.htm (http://247wallstreet.typepad.com/.shared/image.html?/photos/uncategorized/2008/10/27/sirius_logo.htm) Sirius XM Radio (NASDAQ: SIRI) did something rather unusual if you consider its recent downward trend. Its shares rallied close to 30% today. Sure, you have to consider how low shares had gotten and take into consideration how little this means in raw dollar gains. But you also have to consider the meat here and why this would happen.
Last week we discussed how lucky the company is that NASDAQ has pulled its $1.00 ejection button (http://www.247wallst.com/2008/10/can-sirius-avoi.html) from the listing requirements. Everyone, and that includes us, has commented how the company is drowning in debt. But its debt financing that looked so high when it was made actually looks pretty cheap considering the levels we have seen investment grade and "AAA-rated" issuers have accepted in recent weeks.
We have refrained from printing some of the crazy rumors out there about the company. But when we see gains of this percentage (even in a penny stock) on a bad market day, it makes us wonder if there might finally be some meat to the gossip. There are two issues which could come into play and both have been subject of chatter.
The first such market talk has Mel Karmazin leading a "go-private" MBO. Karmazin has bought shares (http://www.247wallst.com/2008/08/insider-buying.html) in recent months when he could. We have yet to find a single shred of proof that this would occur, and we have not found anyone credible or with size who actually believes this is in the works. Even after the massive sell-off in share prices, Karmazin might not be able to raise the cash in today's no-credit environment. Can you imagine the debt assumption on top of the existing debt and on top of the existing capital needs that it faces in the near future?
The other possibility here is that the company would consider a reverse stock split. Karmazin has said that they could consider anything (http://www.247wallst.com/2008/07/karmazin-tries.html) before in response to a David Faber question directly about a reverse stock split, and at current share prices he might not have much choice. The problem is that we believe most traders and investors would join the trend of recent reverse stock splits with the cheers of "Yeah! We get to short sell this stock all over again!"...
An issue to consider here is that there have been more rumors over the last 6 or 7 years with many technology and media companies being rumored as possible suitors of either Sirius or XM. None have ever materialized. The only reason to even mention it today is that the current price would allow some buyers to snap this up for a song if they have ample capital or if they can easily access capital needed to fund the operations.
If Karmazin has something special up his sleeve, we'll know sooner rather than later. The things that may have been responsible for driving this up seem hard to fathom, but we have always believed that the market speaks louder than personal opinion.
A 30% gain to $0.38 doesn't even come close to recapturing the personal fortunes which have been lost by investors in this cult stock. But for many, this may be the first round of hope in a while.
Jon C. Ogg
October 27, 2008
http://feeds.feedburner.com/~f/typepad/RyNm?i=AodtM</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=AodtM) http://feeds.feedburner.com/~f/typepad/RyNm?i=e2AfM</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=e2AfM) http://feeds.feedburner.com/~f/typepad/RyNm?i=cdebm</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=cdebm)
complete story here... (http://www.247wallst.com/2008/10/with-sirius-up.html)
http://www.247wallst.com/images/2008/10/27/sirius_logo.htm (http://247wallstreet.typepad.com/.shared/image.html?/photos/uncategorized/2008/10/27/sirius_logo.htm) Sirius XM Radio (NASDAQ: SIRI) did something rather unusual if you consider its recent downward trend. Its shares rallied close to 30% today. Sure, you have to consider how low shares had gotten and take into consideration how little this means in raw dollar gains. But you also have to consider the meat here and why this would happen.
Last week we discussed how lucky the company is that NASDAQ has pulled its $1.00 ejection button (http://www.247wallst.com/2008/10/can-sirius-avoi.html) from the listing requirements. Everyone, and that includes us, has commented how the company is drowning in debt. But its debt financing that looked so high when it was made actually looks pretty cheap considering the levels we have seen investment grade and "AAA-rated" issuers have accepted in recent weeks.
We have refrained from printing some of the crazy rumors out there about the company. But when we see gains of this percentage (even in a penny stock) on a bad market day, it makes us wonder if there might finally be some meat to the gossip. There are two issues which could come into play and both have been subject of chatter.
The first such market talk has Mel Karmazin leading a "go-private" MBO. Karmazin has bought shares (http://www.247wallst.com/2008/08/insider-buying.html) in recent months when he could. We have yet to find a single shred of proof that this would occur, and we have not found anyone credible or with size who actually believes this is in the works. Even after the massive sell-off in share prices, Karmazin might not be able to raise the cash in today's no-credit environment. Can you imagine the debt assumption on top of the existing debt and on top of the existing capital needs that it faces in the near future?
The other possibility here is that the company would consider a reverse stock split. Karmazin has said that they could consider anything (http://www.247wallst.com/2008/07/karmazin-tries.html) before in response to a David Faber question directly about a reverse stock split, and at current share prices he might not have much choice. The problem is that we believe most traders and investors would join the trend of recent reverse stock splits with the cheers of "Yeah! We get to short sell this stock all over again!"...
An issue to consider here is that there have been more rumors over the last 6 or 7 years with many technology and media companies being rumored as possible suitors of either Sirius or XM. None have ever materialized. The only reason to even mention it today is that the current price would allow some buyers to snap this up for a song if they have ample capital or if they can easily access capital needed to fund the operations.
If Karmazin has something special up his sleeve, we'll know sooner rather than later. The things that may have been responsible for driving this up seem hard to fathom, but we have always believed that the market speaks louder than personal opinion.
A 30% gain to $0.38 doesn't even come close to recapturing the personal fortunes which have been lost by investors in this cult stock. But for many, this may be the first round of hope in a while.
Jon C. Ogg
October 27, 2008
http://feeds.feedburner.com/~f/typepad/RyNm?i=AodtM</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=AodtM) http://feeds.feedburner.com/~f/typepad/RyNm?i=e2AfM</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=e2AfM) http://feeds.feedburner.com/~f/typepad/RyNm?i=cdebm</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=cdebm)
complete story here... (http://www.247wallst.com/2008/10/with-sirius-up.html)