I'm often criticized when I take a look at the bi-weekly short data released by NASDAQ for Sirius XM (SIRI). Why? Because I've repeatedly stated that I do not feel a short position in Sirius XM is wise.
One only has to look at my article from March 10th. At the time short positions in Sirius XM totaled 414 million shares sold short. I posed the question:
But are shorts "smarter" than longs? Are the 414 million short positions based on more intelligence than the over 7 billion long positions in the company (6.6 billion outstanding shares plus the shares sold short.)
I'd have to think the answer here would be "no."
I suggested at the time that Sirius XM's performance and company buyback plan would likely limit downside to the stock, and that shorts should consider covering. Some take offense to my suggestion that shorts are not necessarily smarter than longs, but the fact is that you're either right, or you're wrong. Longs and shorts can't both "win."
The 414 million total was taken from the trade date of 2/25, and as you can see from the chart below, chances to cover at prices under the closing price of $3.03 on 2/25 have been very few.
Yet what has happened since then? Nearly 35.5 million shorts have likely covered at higher pricing than they could have previously. All wrong? No. To be fair the data does not say at which prices shorts have covered at, but I think it's safe to say that most have covered a bit higher than they could have on 2/25.
Given that Sirius XM's Q1 conference call is coming on April 30th, perhaps some shorts, 35.5 million, are wising up? If you follow my line of thinking, Sirius XM has already begun its buyback plan, and an announcement within the call stating that holders of Sirius XM now own more of the company by percent than they did before may send shares up in price. On top of this, auto sales have been excellent from the beginning of the year, and this should drive considerable numbers of new trial subscribers to Sirius XM. Will guidance be raised? Perhaps. And I wouldn't want to be short if it was.
Near $3.15 per share may look like a bargain after Sirius XM's Q1 call, and if volume picks up it could send shares right through that $3.25 barrier on better than expected news. This is not the time to be short Sirius XM.
Additional disclosure: I am long SIRI January 2014 $2 and $2.50 calls.