Sirius XM Stock Action: Typical for Penny Land

By Brandon Matthews

Sirius XM Radio’s (SIRI) common stock seems to be in free fall mode these days, having closed lower each of the last 8 trading days. With this drop, of course, come the shouts of manipulation from retail investors who question how it can be that a company with such a positive outlook can be trading at such a low share price.

Recently, a Satwaves forum poster likened the reaction to sports gamblers, who swear they would have won if not for a bad call or a “fix” being in. As long as SIRI common stock trades in penny land, it will trade like other stocks in penny land. It really is that simple.

Despite such a large retail interest in the equity, retail investors have absolutely no power over the stock’s price. Retail investors often question who in their right mind would sell Sirius XM at the pennies it currently trades for. The large institutions in this regard are the sole movers of SIRI’s price per share. The fact remains that far too many shares are outstanding. The 26.6% of shares that are owned by institutions represent over 1 billion shares that can be actively traded by professional money managers on any given day.

These money managers buy and sell shares that number from the millions to the hundreds of millions. These large transactions allow for large gains to be made by small price fluctuations that seem insignificant to retail Sirius investors. A professional hedge fund, for example, which buys 10 million shares of SIRI at .34 and sells those shares for .36 realizes a gain of $200,000.00. This type of transaction can occur in a single day, over multiple days or several times within the same day.

Recently, Sirius XM spiked to a .63 high which was preceded by a chart pattern that alerted each of these money managers that the stock was about to soar. Many bought the equity and realized gains that were simply astronomical. The recent sell off is simply the result of these funds cashing in on their gains. They have no attachment to Sirius XM such as that of a retail investor.

Manipulation? No. This is capitalism defined. Until Sirius XM reduces its float by enacting the already approved reverse stock split, Sirius XM will continue to trade in penny land to the benefit of these large institutions.

Position: Long SIRI

Comments

[jmsithy:]

So what are they waiting for do the RS it would not hurt me seeing I only have a small amount and would benifit going to 2.00 or more

May 20 06:56 AM

[fpcat1:]

management plans to do both - INCREASE the float by one billion shares and then REDUCE the inflated float with an r/s.

retail shareholders will be hit with a double whammy if/when both the dilution and the r/s are implemented.

May 20 08:05 AM

[underway:]

RS has been the death knell for 90% of the companies that try it. There are exceptions (priceline.com for one). But, it's risky because the street usually attaches a negative view of the strategy and the selloff following RS causes the new, higher SP from RS, to drop like a rock, killing market cap. I hope the RS does NOT happen. Let this company move forward and show pos cash flow, and then profitability, and the SP will rise on its own. The only reason to RS is to maintain listing on NASDAQ. If SIRI can get over a buck on its own, no reason to RS. IMHO.

May 20 08:27 AM

[User 368600:]

On May 20 08:05 AM fpc wrote:

> management plans to do both - INCREASE the float by one billion shares
> and then REDUCE the inflated float with an r/s.
>
> retail shareholders will be hit with a double whammy if/when both
> the dilution and the r/s are implemented.
>
WELCOME.
It is nice to have another person telling these SIRI types
(or trying to tell them) the realities of SIRI stock being a miserable choice to invest any money. It looks to me as if they cant even think past the gigantic amount of shares SIRI already has, much less the
concept of adding another Billion shares and reverse split.
Some of them even think SIRI is making money !!!
It's like repeatedly telling someone he cant fly only to have him insult you again and again . . .
After a dozen times I WANT TO see him strap on those wings try. LOL

May 20 08:54 AM

[longandshort:]

Agreed.
Good recent example Conexant (CNXT). There will be an uptick initally after the RS but will head back down to penny stock status. SIRI investors are better getting out and investing in the broader market.


On May 20 08:27 AM underway wrote:

> RS has been the death knell for 90% of the companies that try it.
> There are exceptions (priceline.com for one). But, it's risky because
> the street usually attaches a negative view of the strategy and the
> selloff following RS causes the new, higher SP from RS, to drop like
> a rock, killing market cap. I hope the RS does NOT happen. Let this
> company move forward and show pos cash flow, and then profitability,
> and the SP will rise on its own. The only reason to RS is to maintain
> listing on NASDAQ. If SIRI can get over a buck on its own, no reason
> to RS. IMHO.

May 20 02:34 PM