Why the Spike in Sirius XM's Short Interest?

I recently reported that from a technical standpoint, Sirius XM (SIRI) was and continues to show signs of a looming technical breakout. The bullish pennant formation on a six month chart is a clear sign that the latest battle between supply and demand is about to end. Either supply or demand will break down, with the uptrend indicating it more likely that supply will break down first. The breakout in fact, should have already occurred. Traders witnessed the stock rise quickly into the .40+ range several weeks ago, only to see the stock price pulled back down. So where has all this new supply of shares come from?

Sirius XM short interest is reported to have spiked by approximately 20 million shares in the last two weeks, from 161 million shares to 181 million. This number represents nearly a full day's trading volume. It is also likely that this number has increased significantly in the last week alone, as more shares that did not exist just two weeks ago, continue to be sold at the high to mid .30 levels. The 12% increase in short shares may seem high, but the total number of shares shorted represents less than 5% of the company’s float. That does not indicate much of a negative bias.

The overall sentiment does not support a good short story. The only visible, potential negative for Sirius XM is the same as every company; poor first quarter results. Fully expected, it is full year guidance and outlook that will be the determining factors for all equities from Sirius XM to Exxon Mobil (XOM), as first quarter results are reported.

As a worst case scenario, Sirius XM may have seen negative subscriber growth in Q1. Offsetting this is the expectation that the company will continue to show dramatic improvements to its bottom line as a result of merger synergies. There is also the overhang of a potential reverse split, which some may be betting on as a net negative for the company. With only 5% of shares short however, such a bet seems misguided.

Position: Long SIRI.

Comments

[connorport:]

Lets see the numbers you analyzed. Also would like to know where you obtained the numbers. Can that be done or do you think you can singlehandedly bring the stock down by yourself?


On Apr 13 12:42 AM wholesalecd wrote:

> Siri is a failure and will fail. Sell your stock NOW! Don't buy unless
> you want to lose all your money.
>
> Bankruptsy soon from the numbers I just analyzed.
>
> yep, Jay

Apr 13 11:12 AM

[connorport:]

Yes it can and theres a good chance it will. they have till the end of the year to bring it back over a $1. I Doubt Liberty will immediately dump billions of shares on the fire at once to watch them devalue. Hopefully Mel has a plan to buy these shares back maybe using XM satelites as payment. Would be nice!


On Apr 13 08:21 AM Come on Guys Lets get Sirius! wrote:

> Hey guys, do you think this stock can still Reverse Split? When is
> the cut off date?

Apr 13 11:17 AM

[relmar2003:]

Connorport, Killer!!!!!
Good to see you guys. Killer, the dog is being bored. Look, hes sleeping!!! Get him in there and attack!!! I see a weakness on their outerflank!!! .37 cents today if we get a late day large buyer!!!

Apr 13 12:40 PM

[founding fa...:]

Can't we just have baseball and let it go at that?

Apr 13 02:10 PM

[founding fa...:]

There is one reason I subscribe to XM Radio, none of the dozen local commercial stations believes that baseball is worth broadcasting on AM or FM. Fine, none of their programs is distinctively different than the next -- music and mindless babble about pop culture. So we've got an agreement, they say to hell with baseball and I take my ears elsewhere. I can't afford cable or satellite television while paying for my children's education, but I can afford satellite radio.

Apr 13 02:12 PM

[between the...:]

Wouldn't it be cool if Simon Kow (sp?) came over to SIRI XM to start up the Reality Radio channel in a move similar to Howard. As Randy says "What???"

Apr 13 03:19 PM

[between the...:]

"Beauty in the Ears of the Beholder". America listens to the contestants and votes solely on vocals. No knowledge of the looks of the candidate and makes a judgment solely on the voices. After the winner is selected, the contestants looks are revealed. That would be cool!

Apr 13 03:33 PM

[connorport:]

Relmor! Our day comes a few days before and on the day of earnings. Shorts will cover quick if their smart and i think we will get some ok earnings news with some positive guidance. Should see a spike up for a few days there. What do you think?


On Apr 13 12:40 PM relmar2003 wrote:

> Connorport, Killer!!!!!
> Good to see you guys. Killer, the dog is being bored. Look, hes
> sleeping!!! Get him in there and attack!!! I see a weakness on their
> outerflank!!! .37 cents today if we get a late day large buyer!!!

Apr 13 05:18 PM

[connorport:]

I think we see over .50 and i think this will set the new low for the stock price.

Apr 13 05:19 PM

[matty3000:]

hope your math is better than your spelling.

long siri


On Apr 13 11:12 AM connorport wrote:

> Lets see the numbers you analyzed. Also would like to know where
> you obtained the numbers. Can that be done or do you think you can
> singlehandedly bring the stock down by yourself?

Apr 13 05:48 PM

[mlongj:]

As long as SIRI is traded, there will be short sellers in the mix. Apparently someone or a whole lot of someones think the SP is going to take a nose dive. But the facts just do not seem to support such logic at this time. Stuck between .3 and .4 is a whole lot better than being stuck between .1 and .2. Although the SP will not go up overnight, it will go up nonetheless. It is interesting that the SP really has not gone below .33 with the short increase. If it were as drastic an increase in the short interest as implied in the article, the SP would be below .3 right now, but it is not. I agree with Mr. Munarriz over at Motley. He states in his latest article that it is a big risk being short on SIRI right now. As he states, the SP can increase dramatically from here at a moments notice and there will be much to lose on the short side of this equity. Imagine postive articles at the Fool. This should be enough for everyone to realize that Sirius XM dodged a huge bullet (BK), and are now in the game to stay. There is too much backing for them to fail now. Let the shorts think what they will...this equity has seen its worst days already. Onward to 1.00!

Thanks Brandon for the timely article.

Long SiriusXM

Apr 13 07:22 PM

[relmar2003:]

I think we will see .50 cents by the CC. I am predicting people will buy on the rumor(of a good report). Will they sell on the truth? Maybe not....After what happened last CC, and report, I think people will want to "risk" being all in this time, instead of on the sidelines.

Apr 13 08:59 PM

[connorport:]

Hopefully the shorts have bailed at this time and will find SIRI too risky to short and a bottom will be established somewhere above .50 to .75. I think the next run will have some basis with some real numbers and guidance. The only thing left that concerns me here is that i think Mel wants the RS.


On Apr 13 08:59 PM relmar2003 wrote:

> I think we will see .50 cents by the CC. I am predicting people
> will buy on the rumor(of a good report). Will they sell on the truth?
> Maybe not....After what happened last CC, and report, I think people
> will want to "risk" being all in this time, instead of on the sidelines.

Apr 14 09:01 AM

[Bababooie:]

The short number of 161M represents a little over half of the hedged amount. Shorting 100% will never be done by the bond holders. I would watch the Short number based on the 150M "Neutral" valuation. As the shorts get closer that number
the more positive outlook by those bond holders. And I would have to believe they have information that the common investor will find out after their position has been established.


On Apr 12 11:19 AM relmar2003 wrote:

> Brandon, I wouldnt worry about the short interest as long as its
> under 300 million. 260 million at any one time can simply be the
> hedged short from 2014. If its under than, that means even some of
> the lent shares used for shorting are not currently doing that. Very
> bullish. And their are NO retail shorts on this stock. Very bullish
> as well. I think the .34-.40 cent ranges days are numbered in the
> single digits now.

Apr 14 12:47 PM

[relmar2003:]

I know, they are trying to bore us to death. Kill us off. :)
Stock price is set to go up soon. Only one way to go. Up. Q1 buying should start soon(people wont want to miss out on good news like last time). Might be a huge sell off if its a bad quarter, but thats neither here nor their. Nor do I think for their bottom line it will be a bad quarter. GM sales slow down couldnt have come at a better time. Go Ford, Crystler, Kia!!! And all the other makers that have over 50% penetration rate.

Apr 14 03:49 PM

[Remlap:]

Hi Brandon, Two questions... 1) What are the prospects for a takeover? It seems like a company with approximately $2B (and growing) in annual revenues and $3B in debt is ripe for a takeover. A comparable situation would be the speculation of a takeover of Textron by a Middle-Eastern firm. 2) What is your opinion on the fair value of the company, assuming that they pay off debt that matures this year and become cash flow positive?

Apr 14 04:16 PM

[mlongj:]

Remlap,

I believe it was stipulated that Liberty could not own over 50% of the company before 3 years from the time of the cash infusion. I may be wrong, but I do not think a take over at this time would be in the cards.
However, it could also be argued that the takeover has already happened. But, at least it was not a hostile takeover.

Long SiriusXM

Apr 14 07:27 PM

[connorport:]

If you put the real numbers to SIRI we are really sitting on a beaten up stock. The days of 30-50% pops is coming soon. The .33cent line was drawn by speculators expecting to see a $1 soon. That's a nice 300% pop for them. I hope they get their wish. 1st Q CC will be ok but 2nd Q CC will bring in everyone who wants to see some positive. Might hit .75 by summer if the upgrades keep coming. Its about band wagon time. Lets get XM's assets to the yard sale and pay off some debt. We might just see .10 per share earnings in a year or so.

Apr 15 05:22 PM

[connorport:]

HERE WE GO!!! We may own part of a ligitimate company before its over with!

LONG SIRI!!!

Apr 16 12:47 PM

[connorport:]

There hasn't been nor will there be a take over. SIRI has valuable assets at XM that Liberty would like to have (Obviously) or a cash infusions to keep these assets out of competitor hands would not have been established. These assets can easily be bartered to buy back the common share options that Liberty holds and pay off nearly all of SIRI's debt it faces for years to come. There's a reason very few companies have an investor plop $500 million in your lap if your company was upside down with no recovery plan. Its here, investors just want to hear and see it.


On Apr 14 07:27 PM mlongj wrote:

> Remlap,
>
> I believe it was stipulated that Liberty could not own over 50% of
> the company before 3 years from the time of the cash infusion. I
> may be wrong, but I do not think a take over at this time would be
> in the cards.
> However, it could also be argued that the takeover has already happened.
> But, at least it was not a hostile takeover.
>
> Long SiriusXM

Apr 16 12:53 PM