Breaking: Sirius XM Shorts Continue To Kick The Can

| About: Sirius XM (SIRI)

The short interest of Sirius XM (NASDAQ:SIRI) continues to climb at an alarming rate. Just released data show the current number of shares sold short at a staggering 414 million shares, which is almost 13% of the public float. According to Nasdaq:

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
2/28/2013 414,016,386 59,194,373 6.994185
2/15/2013 406,288,219 58,657,871 6.926406
1/31/2013 401,633,942 38,833,084 10.342571
1/15/2013 379,000,361 80,896,167 4.685022
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
7/31/2012 329,897,851 38,065,661 8.666547
7/13/2012 304,461,310 43,694,659 6.967930
6/29/2012 289,951,168 33,488,425 8.658250
6/15/2012 298,260,697 28,277,090 10.547786
5/31/2012 306,525,780 59,829,225 5.123345
5/15/2012 294,106,223 87,262,664 3.370356
4/30/2012 271,252,407 42,569,238 6.372029
4/13/2012 285,024,747 67,168,964 4.243399
3/30/2012 287,587,035 40,523,817 7.096741
3/15/2012 307,802,184 47,153,056 6.527725
Click to enlarge

My biggest question is why? The shares have been heading steadily higher for the last three years, soundly beating all three of the major market indices:

Chart forSIRIUS XM Radio Inc.

The earnings for Q1 are expected to jump 50% over last year, and the revenue is expected to come in over $100 million higher than Q1 last year. This quarter will be over at the end of March, and so far it looks like the results will be very strong. New car sales continue to rise, which will lead to even higher subscriptions than originally anticipated. And then there is the 2 billion dollar share buyback the company has initiated. To short a company like this could be quite costly, to say the least.

Earnings Est Current Qtr.
Mar 13
Next Qtr.
Jun 13
Current Year
Dec 13
Next Year
Dec 14
Avg. Estimate 0.03 0.03 0.10 0.13
No. of Analysts 12.00 12.00 12.00 13.00
Low Estimate 0.02 0.02 0.07 0.08
High Estimate 0.03 0.03 0.13 0.17
Year Ago EPS 0.02 0.48 0.51 0.10
Click to enlarge
Click to enlarge
Revenue Est Current Qtr.
Mar 13
Next Qtr.
Jun 13
Current Year
Dec 13
Next Year
Dec 14
Avg. Estimate 909.85M 939.33M 3.81B 4.17B
No. of Analysts 11 11 14 14
Low Estimate 896.95M 919.18M 3.74B 4.03B
High Estimate 928.00M 957.00M 3.87B 4.29B
Year Ago Sales 804.72M 837.54M 3.40B 3.81B
Sales Growth (year/est) 13.10% 12.20% 11.90% 9.50%
Click to enlarge

But, this is good news for the Sirius Bulls. As I wrote in an article last month, the share price goes up during the option activity each month as the shorts are forced to cover:

On the chart below, which only shows weekly prices in an effort to save space, there are distinct highs in the first part of the month leading up to a peak in the middle of the month when the options close. Then after the shorts have covered, there is a low period after the options close.

Price Of Sirius XM
Click to enlarge
Date Open High Low Close Avg Vol Adj Close*
Feb 25, 2013 3.06 3.10 2.97 3.06 69,392,400 3.06
Feb 19, 2013 3.16 3.20 3.02 3.05 50,763,100 3.05
Feb 11, 2013 3.13 3.23 3.13 3.15 47,217,700 3.15
Feb 4, 2013 3.23 3.24 3.10 3.12 67,168,800 3.12
Jan 28, 2013 3.15 3.25 3.12 3.23 45,349,300 3.23
Jan 22, 2013 3.17 3.17 3.08 3.15 45,649,800 3.15
Jan 14, 2013 3.15 3.19 3.12 3.16 46,870,300 3.16
Jan 7, 2013 3.11 3.19 3.06 3.16 83,933,700 3.16
Dec 31, 2012 2.88 3.15 2.88 3.10 80,038,300 3.10
Dec 24, 2012 2.93 2.96 2.88 2.89 24,436,300 2.89
Dec 17, 2012 2.86 3.01 2.85 2.95 80,986,000 2.95
Dec 14, 2012 0.05 Dividend
Dec 10, 2012 2.78 2.93 2.68 2.91 66,648,400 2.91
Dec 3, 2012 2.79 2.85 2.73 2.76 88,461,600 2.71
Nov 26, 2012 2.76 2.80 2.67 2.77 70,113,500 2.72
Nov 19, 2012 2.71 2.82 2.69 2.78 59,787,300 2.73
Nov 12, 2012 2.77 2.84 2.55 2.69 82,238,900 2.64
Nov 5, 2012 2.90 2.90 2.66 2.75 69,293,800 2.70
Oct 31, 2012 2.84 2.96 2.74 2.90 85,045,500 2.85
Oct 22, 2012 2.94 2.95 2.79 2.82 75,907,400 2.77
Oct 15, 2012 2.78 2.97 2.76 2.92 104,194,800 2.87
Oct 8, 2012 2.67 2.79 2.63 2.78 95,109,900 2.73
Oct 1, 2012 2.59 2.75 2.56 2.69 67,363,800 2.64
Sep 24, 2012 2.53 2.60 2.44 2.59 63,530,700 2.54
Sep 17, 2012 2.44 2.59 2.33 2.54 81,172,600 2.49
Sep 10, 2012 2.51 2.53 2.39 2.47 63,045,400 2.43
Sep 4, 2012 2.53 2.56 2.49 2.53 39,204,000 2.48
Aug 27, 2012 2.55 2.56 2.49 2.53 51,697,700 2.48
Aug 20, 2012 2.60 2.64 2.47 2.54 44,230,600 2.49
Aug 13, 2012 2.49 2.60 2.47 2.56 72,447,000 2.51
Aug 6, 2012 2.17 2.51 2.17 2.48 168,687,700 2.44
Jul 30, 2012 2.18 2.20 2.09 2.16 30,977,000 2.12
Jul 23, 2012 2.07 2.17 2.03 2.16 40,531,100 2.12
Jul 16, 2012 2.04 2.16 2.02 2.10 41,829,900 2.06
Jul 9, 2012 2.11 2.12 1.99 2.05 39,842,900 2.01
Jul 2, 2012 1.84 2.13 1.84 2.05 50,902,700 2.01
Jun 29, 2012 1.88 1.89 1.82 1.85 37,077,600 1.82
* Close price adjusted for dividends and splits.
Click to enlarge

It is difficult to time the exact day of each month that the buying pressure will be the highest, but according to the chart above, it is usually between the 11th and the 20th. So, I expect Sirius to bust through the $3.25 high that it has been stuck at before the 20th of this month. A short squeeze like this does not affect the rising price cycle of the stock that is caused by good company leadership and fundamentals. But rather, it causes huge buying pressure near the option expiration time which sends the shares higher than normal. And as the chart shows, the price comes back down after the options close as the price continues its upward cycle. The bears continue to bet that this cycle will eventually end. I wouldn't count on it. Sirius CFO David Frear will speak on Tuesday at the Piper Jaffray Media Conference. Anything positive that he has to say will just add rocket fuel to the share price.

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.