Does Ergen Have Enough Leverage to Play Out His Sirius Hand?

With news reports swirling about Charles Ergen making a move for Sirius XM Radio (SIRI), it has become hard for anyone to really know what is happening. Reports that Ergen tried to buy the company in late 2008 joined other stories that had him trying to force bankruptcy, and carrying an interest in the terrestrial repeater network. Amidst all of the confusion, shareholders find the equity price right back where it was prior to the news coming out.

Since the merger, and the collapse of share price, I have been asked time and time again about the prospects of bankruptcy. My opinion was always the same. I believe in the concept of satellite radio, and was more worried about someone swooping in to buy the company cheap than I was about it going belly up.

Charles Ergen is doing something very basic. It does not require rocket science to see it, and once investors understand it, the clouds could begin to clear. Ergen is gaining leverage. He is covering his bases, and making the moves that will give him the best chance of reaching his desired goal. The real question at hand is not what Ergen is doing, but how Sirius XM Radio deals with the situation.

Now that the cat is out of the bag, Ergen has perhaps lost a bit of his leverage. The debt he has acquired is not enough to take control even if it were all converted to shares. He likely still needs to buy up shares on the open market, which could begin to drive up the share price. In addition, if other players are thinking of moves of their own, whether for profit reasons or competitive, the dynamic could change even further.

If all of that was not enough to consider, there is the regulatory issue to think about. Will the democratic-controlled FCC allow a satellite television player to become entrenched in satellite radio as well? Ergen is not only in a poker game with Sirius XM but the FCC as well, and the stakes are high.

This will all play out over the coming weeks. Does Ergen have enough leverage? What will the company say in their next shareholder meeting? Shareholders, who have already been waiting for a long time to see a glimmer of hope, now have to digest a possible takeover. Thankfully, it would be hard for this issue to drag on as long as the merger did.

Position - Long Sirius XM Radio

Comments

[bdp:]

Now here's the problem with all of you. I will bet very few of you make any real money in the market. Not with the attitudes that are coming across here. Although losing all my investment would be very painful to say the least and I do not have a huge bankroll to play with, I am not willing to be manipulated by my own paranoia and just float along with the collective doom mounting here. This is the major reason why the stock is trading so low. Because most of the share holders take press releases as gospel. But you are forgetting one thing. News is only news if it can be substantiated by solid facts. If news agencies were required by law to report only facts and not speculation or opinions, the world would be healed much more rapidly. The idea behind news is to target the emotions to create a reaction. This is what these guys get off on. (Talk about having god like powers... and they know it!) So with this said. give up and go through the rest of your life as a loser because I am sure you will continue to be confronted by similar situations all along the way and will give up all the same. Or you can stop worrying about what you speculate is going to be the final outcome and continue to make decisions on what you feel makes sense and not throw yourself over the cliff just to get it over with. Perhaps the best mindset to have is to put your greed and dreams aside and understand that the money you invest can vanish completely. Be sure that you are okay with that before you invest. Know that you are going to make mistakes. But never surrender to defeat until defeat is proven. Otherwise you risk an absolute self fulfilling outcome.

Feb 10 11:28 PM

[BigVinnie:]

Your obviously the kind of guy that has never been to vegas. Not to mention stock market gambling is far more lucrative. Unlike Vegas when you lose, you really lose. Unlike the market you technically lose nothing as long as you file for a capital gains loss. you have to pay to play.
I'd rather say f%ck it, it's 6 cents a share right now. If I win, I win big, if I lose, I'll just get my money back over the coarse of the next few years.
Either way I win, Mel wins, Ergin wins. Your not understanding the magnitude of this situation right now.
I'm all in for 50,000 more shares first thing in the morning.


On Feb 10 05:45 PM between the hedges wrote:

> My understanding is that there is a clear difference between a filing
> for liquidation - where the company closes shop and folds - and a
> reorganization - where debt is reorganized. My understanding is
> that in a reorganization, the shareholders keep their shares and
> the company gets to redo its debt under more favorable terms. I
> think that this is a ploy. Be careful shareholders or you will end
> up selling cheap, similar to the Wachovia Wells Fargo scenario when
> Wachovia went cheap and people panicked out. Hang tight and ride
> it out. Like I say, the share prices are already at bankrupcy levels.

Feb 10 11:40 PM

[bdp:]

Imaze-
What I meant by Echostar being the least desirable is not the deficit of potential benefits, but on more of a business level where two opposing personalities with opposing ideas can coexist at a tolerable level let alone a mutually beneficial one. I believe if Mel is working on forcing a more reasonable agreement with C. Ergan by selectively leaking news the past few days that seems to possibly be undermining any plans to take control of Sirius.

Feb 10 11:43 PM

[cos1000:]

bdp,
No disrespect intended, but your sounding like a bad HS football coach. Starting with "Now here's the problem with all of you" isn't exactly a rallying cry to listen to the rest of what you have to say.... OK.

Feb 10 11:49 PM

[cos1000:]

Imaze,
Thanks and I also appreciate your comments on the subject... This is not over for the longs here, but if you really need your money, don't put any more in.... leave what's left and smile if it comes back. For the gamblers out their, you know you have to double down and get all in......

Yoman,

The shorts will have to cover before they get caught in BK... Read s162's post above..... he has good insight on this.....

Feb 10 11:55 PM

[bdp:]

cos 1000-
Point taken. Sorry to anyone else who was offended. (I don't even like football.) Once again with the appropriate retraction:

I will bet very few of you make any real money in the market. Not with the attitudes that are coming across here. Although losing all my investment would be very painful to say the least and I do not have a huge bankroll to play with, I am not willing to be manipulated by my own paranoia and just float along with the collective doom mounting here. This is the major reason why the stock is trading so low. Because most of the share holders take press releases as gospel. But you are forgetting one thing. News is only news if it can be substantiated by solid facts. If news agencies were required by law to report only facts and not speculation or opinions, the world would be healed much more rapidly. The idea behind news is to target the emotions to create a reaction. This is what these guys get off on. (Talk about having god like powers... and they know it!) So with this said. give up and go through the rest of your life as a loser because I am sure you will continue to be confronted by similar situations all along the way and will give up all the same. Or you can stop worrying about what you speculate is going to be the final outcome and continue to make decisions on what you feel makes sense and not throw yourself over the cliff just to get it over with. Perhaps the best mindset to have is to put your greed and dreams aside and understand that the money you invest can vanish completely. Be sure that you are okay with that before you invest. Know that you are going to make mistakes. But never surrender to defeat until defeat is proven. Otherwise you risk an absolute self fulfilling outcome.

Feb 10 11:56 PM

[lmaze:]

BDP I get it, I've also calmed down a little since I saw the press release. Lots of pent up emotion came out. I agree, the news that came out this evening was probably leaked by Sirius to force a more reasonable agreement with Ergan, look he's sitting on a great return for his investment however it plays out, but has anyone actually identified how much of the Feb converts he actually holds? What do you think will happen with the pricing on the bonds tomorrow?

Feb 11 12:14 AM

[drevil6406:]

All,

This is not the end...merely the beginning. Best of luck to all of you in these next crucial days!

Feb 11 12:20 AM

[yomann:]

Cos 1000, Thanks for the reply. and all others, thanks too.

Feb 11 12:30 AM

[bdp:]

Lmaze-
I am not sure of the exact amount off the top of my head, but I do believe he holds a substantial amount. Check cos100 or sl32 posting threads. I think one of those guys mentions it in their posts. I think everything is going to remain in a holding pattern. I don't see much of a change either way. The bonds are pretty low right now and will probably hold. Once again, I don't think we are looking at any drastic movement until some hard facts are released. That will either make or break the current situation. I do agree with sl32, that if bk is announced there is going to be a surge to cover by the shorts which would give us a window to get out for what I would think to be realistically between .15-.25 per share. The problem is that you need to witness this in real time in the event there is no bk and Mel did squeak through. If you place a gtc. sell order based on a possible bk, you risk selling yourself short if it does not happen. If you don't and bk is announced and you are not watching the market, you may miss the boat and remain where we are now. Very tricky depending on what your intentions are. We'll see tomorrow.

Feb 11 12:48 AM

[cos1000:]

Now... I have had a little wine...... and I can tell you right now that I am a little pissed......, but regardless of what anyone says, or these guys writing news articles think their doing, their f**k*n with our money. Where and with Who I grew up with, the only money you might get to play with was the change from the bottle of milk or cigarettes you bought, on a chore from your mom or dad. Now, granted, that was about 40-50 years ago, I still don't think much has changed with that "Proxy". These guys might be playing a game of cards with millions of our invested dollars, but they better not screw up the end game...... because some of us, along with the Blue Dog, and a great keeper of the Dog, who I just happen to know, from way up in the Midwest somewhere, (that's you killer, but I didn't tell them a thing), are going to pay a visit to those that think they can waste our time and money. If you waste it and treat us with disrespect, forget about it....... you know what I mean?? Just Forget about it......

Feb 11 01:05 AM

[I'm Not Jim...:]

Big vinnie: You gotta admire guts, whether I agree or not. Why not start taking some options on Echo Star, either puts or calls, so you at least have SOME way to lay off the action? That's what a good bookmaker would do!

Feb 11 01:26 AM

[Big Ben:]

We got smoked! Game over! The only good thing about this news.... we all can stop waisting time following these threads and this bullshit stock!

Cos1000,relmor(and all other versions)s162,168888, it has been nice knowing you! I must say I do find some comfort in my grief knowing I am not alone.

Relmor I might track you down for so needed wisdom or some level 2 info...thanks again.

Peace and love, peace and love.
If we get wiped out....I am cancelling atleast 3 subs. F peace and love....Mel suckered us!

I am pissed...I can't go out with peace and love. THANKS ALOT MEL! AHoLe.

Long Hartwig, Keisel short KEmo.....that fat ass has to go!

Feb 11 01:31 AM

[svosavvy:]

Ding dong the wicked witch is dead. Thank G-d this one stops at zero, because the way this one stinks it shouldn't. If anything it should be an expensive lesson to stay within your 'circle of competence' let money talk and bullsh*t walk.

Feb 11 01:36 AM

[killerkaul:]

Morning Cos1000.................. Well, had a good nites rest and .................... news this morning is still speculative,but does appear to be a chess game between Mel and Ergen. Who will blink first ? Pre market holding now ............. SP up to .06. I guess I'll take it............ could be worse. The Dog has been resting. I'll keep a close watch on him.............. he'll know before any of us, if anything is in the wind. Stay sharp............... We'll be here all day. Best of luck to you all in these................. the darkest days. ...killer and the Dog.

Feb 11 08:36 AM

[dayworker:]

I know it hurts and i'm sorry for everyone. I tried to express to everyone that their game was to get rid of debt and shareholders by BK or a low ball
takeover. When there is $2.7 bil income stream the idea for them is to
figure how to get rid of equity holders and debt and end up with a company
that has a subscriber base. As far as lawsuits go, you are looking at years
and years before anything would be settled. In the meantime they would
bleed the plaintiffs dry stalling and stalling. During those years they would be
raking in the $2.7 bil year after year. Once the equity is rebuilt without
old shareholders and debt they could sell it off for a premium.
They know how to play the game for themselves. I've been saying that
all along. It's bad and they are pretty evil people. I feel bad for all of us who bought in truthfully that we had a winner stock. Except it was a winner for them and not us. We all got taken and a big hit financially.
Sorry for all of us. They got us good.

Feb 11 01:26 PM

[OKMONEY:]

Dayworker:

You hit the proverbial nail on the head. You're analysis is 110% on the money.


On Feb 10 02:24 PM dayworker wrote:

> At this low PS it's either a takeover or BK. I've said that all along.

>
> With the income stream it's a perfect takeover, unless management
> wants
> to keep it for themselves and goes BK. That's why who ever drove
> the
> PS down did it knowing in the future it would be to their advantage.
> It
> wasn't just the shorts trying to turn a profit, there were plans
> in the works
> by different players to get SIRIUS. With $2.7 bil income stream it's
> a gold
> mine. All they have to do is get rid of the shareholders and debt
> by BK
> or low ball buyout and their home free. Their not playing this for
> shareholder interest. They just use stock investors for the capital
> they
> need and jettison them when they can get away with it.

Feb 11 11:37 PM

[OKMONEY:]

between the hedges:
Been in the bankruptcy business for 32 years. Liquidation or reorganization both result in equity holders being wiped out. SIRI is not a liquidation candidate. Senior debt (bondholders) will become the shareholders in a reorganization.


On Feb 10 05:45 PM between the hedges wrote:

> My understanding is that there is a clear difference between a filing
> for liquidation - where the company closes shop and folds - and a
> reorganization - where debt is reorganized. My understanding is
> that in a reorganization, the shareholders keep their shares and
> the company gets to redo its debt under more favorable terms. I
> think that this is a ploy. Be careful shareholders or you will end
> up selling cheap, similar to the Wachovia Wells Fargo scenario when
> Wachovia went cheap and people panicked out. Hang tight and ride
> it out. Like I say, the share prices are already at bankrupcy levels.

Feb 11 11:52 PM

[OKMONEY:]

sl62:

Value your opinion, but, all that is lost in bankruptcy ( a successful Ch 11 reorganization) is debt and the current shareholders. This ain't no chess game or countermove "it's the real thing, baby". This is a loser dies game.


On Feb 10 06:33 PM sl62 wrote:

> Well, it wasn't CHTR last week, but now it is! SP just tok the next
> step down...where you go when the NY Times reports you are talking
> to BK attorneys.
>
> The backside of this whole thing is since Mel and Charlie are rivals,
> would Mel actually do this just to stick it to him? I still just
> can't see it given the risks at losing subs, losing their sports
> contracts, losing way too much. This has got to be a counter move
> and nothing more...

Feb 12 12:08 AM

[IBuriedtheU...:]

What's all the smarmy know-it-alls got to say about today's cut in half haircut?

Let me guess.... it doesn't fit your self-educated calculations. Hard to explain how this love-stock could treat you so bad, isn't it? Just can't imagine Mel & Co. make you look like complete hot-air buffoons. Shocking. And all the cheerleaders who rooted you on..... how could your limited wisdom let them down like that? Kind of hard to imagine which is the bigger fool now. Is it the leader..... or the follower?

Perhaps you all need a group hug..... to tell each other every thing is going to be all right and Mel is going to coming riding in and save you all from humiliation. Try to razzle dazzle each other by throwing a bunch of fancy Wall Street words and acronyms around.... and then make claims how SIRI is testing a new low, so other new readers think you really know what you are talking about, when really you & I know better, and know you don't have a clue. Good luck with running your mouth much more than your ears.

Maybe next time those fakes won't be so eager to criticize others. Maybe now they will understand that Mel doesn't give the first flying flip about them and all their flag waving.

Please, and you know which ones I am talking to, please explain how this happened to such market scholars as yourself?

Feb 12 12:22 AM