Sirius XM: Malone Takes Control Ahead Of Earnings

| About: Sirius XM (SIRI)

According to numerous reports, Liberty Media (LMCAD) has taken majority control of Sirius XM (NASDAQ:SIRI) by purchasing enough shares to put it over 50%. The company has been the largest inside owner of Sirius since 2009. This comes after the FCC approved the Liberty takeover, and gave the company 60 days to buy the additional Sirius shares:

John Malone's Liberty Media bought another 50 million shares of Sirius stock at an average price of $3.15 per share, according to a company filing made with the U.S. Securities and Exchange Commission (SEC) on Thursday. After that purchase, Liberty owns about 1.9 billion shares of Sirius XM's common stock. It also separately owns about 1.29 billion preferred shares. Including the convertible preferred shares, Liberty Media holds about 50.7 percent of Sirius XM's outstanding common stock.

The fact that Liberty bought the stock right before the options expire on Friday, may signal that Sirius shares are heading significantly higher in the next month. Because, as of December 31, there were over 355 million shares sold short. Normally with such a high amount of short interest, the price tends to peak as the shorts are covering. Then it gradually drops after the options close. So, the fact that Liberty bought shares during this "short squeeze," rather than waiting until next week, could mean that this is actually a dip.

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
12/31/2012 355,434,274 54,445,673 6.528237
12/14/2012 370,368,894 76,216,420 4.859437
11/30/2012 339,089,166 66,204,795 5.121822
11/15/2012 296,274,375 77,234,323 3.836045
10/31/2012 297,872,278 89,227,709 3.338338
10/15/2012 274,885,838 78,466,299 3.503234
9/28/2012 288,562,482 71,537,122 4.033745
9/14/2012 298,931,286 51,620,375 5.790955
8/31/2012 283,157,528 49,200,676 5.755155
8/15/2012 259,752,029 105,444,881 2.463392

Sirius recently announced a $2 billion buyback which will add even more buying pressure once it is implemented. And there is the traditional run up to earnings. The company plans to announce financial and operational results for Q4 and 2012 in a few weeks:

Sirius XM will hold a conference call at 8:00 am ET on Tuesday, February 5, 2013 to discuss these results. Investors and the press can listen to the conference call via the company's website,, and on its satellite radio service by tuning to Sirius channel 123 or XM channel 173. The call will also be available on the Sports Play-by-Play channel 962 on Sirius XM Internet Radio as well as through the Sirius XM Internet Radio App for the Apple iPad, iPhone, and iPod touch, and on BlackBerry and Android-powered smartphones.

Will this conference call bring a surprise that Liberty knows about? Most analysts surveyed by Yahoo financial expect earnings for the Golden Quarter to come in at two cents a share, which will be double the EPS a year ago. And there are some that think the earnings for Q4 2012 will triple. Total earnings for the year are expected to be 53 to 54 cents a share compared to .07 for 2011:

Earnings Est Current Qtr.
Dec 12
Next Qtr.
Mar 13
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate 0.02 0.02 0.53 0.10
No. of Analysts 13 10 10 12
Low Estimate 0.02 0.02 0.53 0.08
High Estimate 0.03 0.03 0.54 0.13
Year Ago EPS 0.01 0.02 0.07 0.53

Sirius shares have been soaring for the last six months compared to the rest of the market, and its closest competitor, Pandora (NYSE:P). The company has even upstaged Apple (NASDAQ:AAPL) by over 70%:

Chart forSIRIUS XM Radio Inc.

A lot of this momentum is due to the fact that the satellite radio giant continues to "make good" on its promises. According to a press release last week, Jim Meyer, the company's new CEO, said Sirius will "meet or exceed" all of the 2012 financial guidance. This announcement caused a premature run up on the share price, which led many investors to think that the earnings are now baked in to the current price. However, the conference call may have some exciting news that is in excess of the guidance. As I have noted in other articles, I think the buyback alone will send the share price to $3.65. This is significantly higher than the current price of $3.15.

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.