Analysts See Weak Auto Sales as Real Challenge for Sirius XM 36 comments
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Merrill Lynch analyst Jessica Reif Cohen issued a critical report on Sirius XM Radio (SIRI) Monday. The media analyst notes that auto sales for 2008 and even 2009 appear to be troubling for satellite radio as the OEM channel has been an integral part of the growth of satellite radio.
Cohen has lowered her projections on subscribers, noting,
1) September’s broad decline in U.S. retail (lowest in 3 years);
2) soft electronics sales with Best Buy (BBY) posting -2% September comp;
3) ML lowered U.S. auto forecast for ‘08/’09 to 13.8mn/12.5mn vs. current SIRI guidance of 14mn; and
4) credit crisis has made SIRI ’09 refinancing prohibitive.
The analyst lowered net adds by 47k to 409k, which represents a down 51% year over year comparison. She has also adjusted ARPU to $10.47 from $10.53, and has trimmed revenue by $7mn to $611mn (+15.4% year over year).
Cohen feels that dilution is likely as SIRI uses equity to save the balance sheet. Jessica notes,
Given illiquidity of the high yield and levered loan market, SIRI CEO Mel Karmazin has been obligated to use SIRI equity through debt swaps to take out pending maturities. The primary benefit is the extension of optionality to the extent a restructuring (i.e. bankruptcy) is averted, however, it comes at the cost of dilution.
Cohen maintains an Underperform rating and has lowered her price target to $0.25. Cohen has joined other analysts who now see weak auto sales as another hurdle for satellite radio to negotiate. Between low auto sales and a credit market than can only be described as terrible, she and other analysts see real challenges for the company. Should the company be successful in renegotiating their debt, and should auto sales turn around, then, and perhaps only then, will the analysts on the Street sing a new tune.
With Sirius XM Radio due to announce their Q3 numbers soon, it will be interesting to see not only the reaction of the Street, but of analysts as well.
Position - Long SIRI
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This article has 36 comments:
Why are you STILL writing about it?
Answer: Attention Whores
I bet that by the end of today that comment will start an enormous argument....
lol
LOS ANGELES, Nov. 3 /PRNewswire/ -- The following is being issued by
"Save Sirius":
A group of incensed shareholders, over 500 strong and growing, have
banned together and accused SIRIUS XM management of unjustly enriching
themselves at the expense of shareholders.
A derivative suit on behalf of shareholders has been filed in the
United States District Court, Central District of California, Southern
Division. Case number SACV08-00790CJC
The case accuses management of violations of the FEDERAL RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO), BREACH OF THE FIDUCIARY
DUTY AND THE SHERMAN ACT.
This suit seeks to prevent management from further damaging its
shareholders with massive amounts of additional dilution (8 billion shares
in the fully diluted float) and as much as a 1 for 50 reverse stock split.
"We are working to gain control of our company by seeking to remove
current members of the board as well as top executive Mel Karmazin," said
Michael Hartleib on behalf of Save Sirius and its members. In a September
15th 2008 Wall Street Journal article written by Sarah McBride, she states,
"Given Sirius XM's low stock price, Mr. Karmazin said he would love to take
the company private. But given the state of the credit markets, 'How do you
find [the money] today?' If the company were generating positive cash flow,
which he expects it to do for the full year in 2009, privatization would
become much more feasible, he says."
It is clear that management under Mr. Karmazin's leadership has an
agenda to steal this company from its shareholders.
Given Management's history of:
-- Locking their shareholders into the longest merger delay in history;
-- Preventing the Corporation from seeking alternatives or potential
suitors;
-- Failing to commercially introduce interoperable radios;
-- Their insistence on going forward with the merger at any and all costs;
-- Consummating the merger issuing 300 million shares to the financiers of
XM's debt to be sold short on the open market
Mr. Karmazin and the board have severely damaged shareholder value in
violation of their fiduciary duties. Shareholders have lost over 90% of
their value under Mr. Karmazin's leadership.
"In light of the aforementioned, it is clear that they have lost sight
of their obligations to shareholders and have breached and will continue to
breach their fiduciary duties in the future. We, as a group, will not stand
for this and will use any means possible to prevent and preclude them from
stealing this company from its rightful owners -- we the shareholders,"
said Michael Hartleib, on behalf of Save Sirius and its members.
Contact:
Michael Hartleib
and if Siri did that , I would run buy a satrad , and I would be AGAINST the lawsuit ............but as it is now , I am going to get screwed anyway , so I will NEVER own satrad , and as far as I'm concerned , I hope Siri gets raked through the coals in court
And my beef is not related to any conspiracy theories , I know full well many things have been out of Siri's control this past 2 years .......but it is obvious to me that Siri has continually spent our money irresponsibly , and lived a Cadillac life , on a Hyundai budget with OUR MONEY
Siri is typical of what is wrong in this country , and why we as a nation are having so many problems ........A few at the top are paying themselves incredible amounts of money , EVEN when the company FAILS ..................what a racket ................CAPITA... is ALL about motivation ................Where'... the capitalism when you get paid the same , whether you succeed or fail ????? That is NOT capitalism , THAT , is the OTHER side of communism .....USA sanctioned Communism ( you can bet your ass it is )
I am shure46 , and I approve this message !!!!!!
You used to say that when we were at our darkest hour and when the analyst were against us that it was time to buy...............
It's getting pretty dark.................
I am for this lawsuit. Its a good thing. It keeps management honest. Its wonderful news for all stockholders. Dont treat my shares like garbarge it tells them.
killerkaul..
The prop 10 vote is happening in California tonight so I took a position for 500 shares in CLNE this morning...... it was at 8.25 when I got in..... I'm playing as a trade and if prop 10 passes will hold it to the end of the week.... we'll see what happens
Here's what I think. Times are tough and Mels going to talk about that but there will be a debt payment surprise. Siri will announce some good news on that front. It must be good news and they know it. They have been really busting gut on this topic. Restructuring, cost savings, etc, they know what they have to do.
I thought the same thing today. I watched 5 other stocks to day in what you and I might call "normal" trading. The price trends one way or the other for a time, gains speed on volume, retraces a bit, drops. NORMAL. Now this one for 80% of the last three days seems like someone wants to keep it AT .30, .31, .32. Who makes the market? One trade today was 800,000 dollars and the price did not move. I hate to say I don't have answers. I am asking what can be behind $20mm in trades and the share price does not move?
On Nov 04 05:27 PM justice for all wrote:
> How in the hell can a stock trade 68 million shares and end the day
> at 0, no movement for the day. I find this impossible . It has to
> go up or down, no way can it stay at the same price as the day before.
> Explain this to me.
Obviously , issuing 3.5 B shares would dilute more ......but maybe 1B share dilution is somewhat factored in already
Of course , this would make it harder for the stock to go UP much , but at least maybe we are already at it's lows , and eventually it could climb back to 1.00 - 2.00 ............It's an uphill climb from here , but if this stock dilutes and tanks ANOTHER 90% from here ??? It would be difficult just to get back to 1.00
The only comment I can make about dilution is they currently need 1 Bil shares at .25 to take out the full 250M in Feb debt left. That would take them to very close to their authorized shares of 4.5 B. The company, any company, does not like to go to the additional-share-dilut... often, if at all.
Here is my only reminder to any of those shareholders who are looking for a Silver Lining at this time. Authorizing the additional 3.5 B shares to 8 Billion, does not mean that they will be issued. This is a Huge Trust issue which I cannot see retail investors being comfortable with, but is probably necessary at this point. Even at .25 / share, the remaining debt could be taken out for 2009. That is an additional 700 Mil in debt, May and Dec 2009 needing 2.8 Bil shares to accomplish this dilution. If the dilution is already priced in, and without any debt for 2009 left to worry about, it could be.... and I stress could be.
This action then combined with a RS of even 1 for 20 sometime before Dec 31, 2009, would put the company and, in my opinion, shareholders in a more certain future with only 400 M shares outstanding, after the 1 for 20 RS. If dilution and debt weren't the issue we would probably be trading at a stock price of 5.5 to 6.0 per share. We have already paid for the RS by holding on to our shares. $6 diluted by 20 times is .30 /sh and $5.50 diluted by 20 times is .28. Do you see how we might already have paid for the RS and share dilution. I am not saying that I think this is correct for management to do. I am saying that it is what the company has done. The question I have is Is This The Plan???
My post above and explanation is an attempt to say In general I agree that the dilution is already factored in before we know or knew about it.
well your analysis earlier made sense , about the RS and dilution are probably factored in for the most part ........and i do believe anyone near 1.00 a share when this mess is over will be ok ............after everything is said and done siri would be at 6.00 and need to go to 20.00 for an old dollar to break even ............that is obtainable I think
Me , I'm still over 3 bucks , so i doubt I will ever break even , so my best hope is to reduce my losses as much as I can ..........right now a 50% loss looks good to me ( I am at 90% )
As much as I hate to sink more money into this mess ...... buying a bit at .20-.30 may help matters later on down the road .........so we will see what happens .......looks like we are headed down again this week
If ,as I say, dilution is already in the price, and the stock goes to .20 or high teens on the announcement of their plan to use shares to pay debt, the stock price could go up a bit as analysts digest the concept. In all honesty, this could wipe out a large portion of the retail investors that have been hanging in but, will throw in the towel fearing BK.
Working 2009 numbers without debt payments, significantly changes the FCF to profitability picture. If the stock price goes to .39 - .45 by the end of the year and debt is paid off at higher per share rates, say the current .39 / share average used recently to pay of 50 Mil of the Feb 09 debt, the numbers in the scenario I outlined also change significantly.
As far as GS accumulating shares as payment for 127M, Feb 09 debt, I don't believe that debt will be paid off to Goldman by Sirius, but I could be wrong. I think another buyer of shares, more friendly to the company, will get the shares at an agreed to price, and pay GS off. GS gets cash for its equity, and say... a Morgan Stanley, gets the Cheap shares. Morgan Stanley has already been involved in executing debt exchanges for Sirius. They were the company along with UBS, London Branch, that were lent shares to supplement the 7% XM debt to close the merger that has killed us and the
SP to date. They also were involved in the February 2009 debt at issuance. It would make sense that they would also be involved again here. Mel does not want GS to benefit from what has been made apparent by his disdain for Weinkes, IMHO. Of course if you believe the conspiracy theories, then none of this matters, but then what direction to move forward. If you run the numbers those companies and retail investors getting in at current SP levels will make a nice return before any RS. As the SP goes up, even at say .65 / share, the reverse split ratio can change for the better. Even a 1 for 10 leaves the company with only 800 Mil shares outstanding, sometime in 2009. I am simply trying to use the numbers and reality I know to forecast the future that will occur whether I like it or not.