What a GM Bankruptcy Would Mean for Sirius XM Shareholders

As Sirius XM (SIRI) held its annual meeting of shareholders yesterday, their biggest OEM partner, GM, could well have been getting ready to file for bankruptcy. For the overall sentiment of the economy, the GM news is hardly good. Consumer confidence has been on a virtual see-saw, and a GM bankruptcy has wide reaching implications. The question for Sirius XM shareholders is what impact a GM bankruptcy will have.

Sirius XM has already absorbed the news that Chrysler’s woes will carry a dramatic impact on the Q2 numbers. With their bankruptcy, Chrysler halted production of vehicles, and by extension, satellite radio installations.

General Motors bondholders have rejected a debt for equity swap that would have staved off bankruptcy and facilitate an additional cash infusion into the company. The automaker has until Monday to complete government-ordered restructuring of debt, labor costs, and production plant closures. The UAW had agreed to take a 20% stake in the company, but it is the $27 billion in debt held by bondholders that is the stumbling block. Those bondholders were offered a 10% stake.

Sirius XM Radio recently announced that their deal with the automaker had been extended to 2020 with more favorable terms for Sirius XM. GM has already slowed production substantially, and announced the closure of 1,100 dealerships.

The GM deal with Sirius XM differs from the Chrysler deal. With Chrysler, subscribers are counted when payment for the trial period is received at production. This means the impact from Chrysler will be felt in Q2. With GM, the subscriptions are not counted until the car is sold. This means that the slow in production will impact SDARS in Q3. Ironically, Sirius XM could see a small boost in typical GM subscriber numbers because of steep discounts being offered to consumers to buy cars. Closing dealerships need to clear out inventory and are getting more aggressive with prices. This means a small boost in GM subs, but with slow auto sales, the effect may not be very tangible.

It is possible that the new GM deal could be erased, or even modified in bankruptcy, but that is unlikely in my opinion. Satellite radio provides revenue for GM. What is more troubling than the bankruptcy for Sirius XM investors is that the entire OEM channel is still seeing very poor car sales. stabilization in the OEM channel is what is needed to see satellite prosper. Current 2009 guidance of $350 million in adjusted EBITDA is based on an OEM channel run rate of 9 million car sales for the year with a 50% installation rate. With nearly 5 months in the books, that 9 million run rate is holding, and most analysts do not see it dropping below.

One thing is certain. The current condition of the OEM channel will be carrying an impact for a minimum of the next two quarters.

Disclosure: Long Sirius XM, No Position GM

Comments

[jmsithy:]

I thought they were dropping subs numbers when it came to quarter reports / because of the negativty it painted the stock

"Sirius XM has already absorbed the news that Chrysler’s woes will carry a dramatic impact on the Q2 numbers. With their bankruptcy, Chrysler halted production of vehicles, and by extension, satellite radio installations"

May 28 08:20 AM

[overtaxed42...:]

Sounds like you should buy puts to cover your long position in SIRI. And buy more puts to profit from the inevitable. Just buy them at least three quarters out or further. Or do options even exist for SIRI anymore? Probably not if it is still around thirty cents a share. What a drag this ride has been for investors. Just when the approval finally goes through on the merger between SIRI and XM, their entire lifeblood in the OEM market dissolves practically. First the FTC just about destroyed both companies with its meddling and at the same time took so unbelievably long to do it. Now the biggest employers and their downlines of suppliers and aftermarket chains going under.... I'll tell ya, the new policy Obama has put into play that is taxing everyone more every day and giving free reign on the spending by the yahoo's (sorry Yahoo!, no disrespect intended) in all levels of government, is destroying many more jobs than will ever be created. How anyone can possibly buy into their ill conceived notion that spending more and more to reduce debt is beyond me. Please do tell me of ANY person or business you know of that has been able to spend more and take on more debt load and at the same time reduced their debt. You can not do it. It does not compute. How many jobs have been created thus far? Is it still just the 72,000 census workers? Man that is a lot. I guess we can count the legal firms having to deal with all the bankruptcies. Or they already had jobs so they don't count. Hmmmmm. Anyone see the biggest implosion in history around the corner? Pretending it isn't there lurking won't make it go away. Hopefully the gov'ts of the world can pull off the biggest manipulation ever and keep the rich rich and the rest of us able to still get by. I think I would close all positions in SIRI and take the loss if you have one. They won't survive. There just isn't enough suscriber base to keep it above the water line.

May 28 09:57 AM

[Mr. Stupid:]

ALL PEOPLE WANT IT. MILLIONS ALREADY HAVE IT.

Stop saying that people don't want it. Stop stop....

You're driving the stock down and we don't need that.

Stop now I say,

Frank

May 28 11:47 AM

[relmar2003:]

Mr. Stupid hes not doing anything to the stock. Your posts are more and more confusing. Ive read your old posts. Almost like someon hyjacked your keyboard sometimes...
Interesting, sometimes you sound smart, other times you should like you belong on the short bus. Today for instance, is a short bus day.
Mr. new name is a basher. He gets paid to bash, why hes always here bashing a stock he doesnt own. Probably works for the institutional shorts(2014) hedge. All my opinion of course, I dont have any proof other than logic and common sense.
Short term we might stay around here, sure. Medium term, probably not. Long term, no way. This is the MM's last stand. Going to go beyond their control soon. Once insitutional ownership on this stock is at 50 percent again, we will most likely be able to hold gains. BK with GM or not, matters zero to SiriusXM, they actually prefer a BK scenario.

May 28 12:11 PM

[relmar2003:]

Excuse me, a quick, painless BK scenario, which now looks like a done deal. BK, yes, long and painful, probably not now.

May 28 12:11 PM

[relmar2003:]

Predicting a stock will fall, you will ALWAYS be right. Predicting it to go up, you will always be right. Predicting when it will go up and down... You can always be wrong. Why bashers and pumpers only work one way. BCCharger will never come out and predict an up. So you know his intentions. I however , attempt to explain why it could go up or down. Easy to be right. Even a broken clock is right 2 times a day. So no, no predicters of the drop get an ounce of credit from me. ZERO. Not when all you say is it will go down. Was he here for you when it was at .17 about to go to .40, and I said buy. No he wasnt. He was nowhere. WHen .40 hit, here he comes, proclaiming its goin down!!!
Hilarious...
Come debate me BC on the facts. You wont, as you dont know any. Next...

May 28 12:15 PM

[jmsithy:]

lol hey Mr. Stupid I have a magic Rock to sell you which will bring up the stock


On May 28 11:47 AM Mr. Stupid wrote:

> ALL PEOPLE WANT IT. MILLIONS ALREADY HAVE IT.
>
> Stop saying that people don't want it. Stop stop....
>
> You're driving the stock down and we don't need that.
>
> Stop now I say,
>
> Frank

May 28 12:32 PM

[relmar2003:]

No I didnt. I sold shares at .52 cents. Started buying back at .42. Still have powder if it drops. Im good either way. Thanks BC for proving my point. Like argueing with 3rd graders. Too easy. Miss the good old days when the bashers actually had a good point every week or so. now, nothing but dry....
Yes, you predicted it will fall. Want to take a stab at when it will go up? Didnt think so. Your always right, i told you that. I would be right with this too..
Markets going down...
If it does tomorrow, i was right. 2 weeks from now I was right too. Makes no difference if you cant call it both ways. Unless you predict a permanent drop, and it holds, your comments are useless. Your a basher. You dont own the stock. Why are you here? Its not to be nice, otherwise you would have been around in the BK fear days telling everyone your brillant wisdom then about how it wasnt. O thats right, you came out on the up, so your useless, like I said. 100 percent worthless.

May 28 02:03 PM

[Bababooie:]

In stock, you should buy what you use, or see others using. Bashing a stock has no benefit to anyone but those who short the stock. This stock is not like "another new screen name", it experiences drops and rises on economic activity related to the business of Sat radio. The mood swings which "another new screen name" experiences can be handled with medication. The swings in the SP of Siri can be used to the advantage of the investor and take "SMALL" profits no matter which way the SP goes. Anyway, my opinion is that EVERYONE should do your own homework when investing. My losses are limited to time I've invested reading crap from bloggers like ""another new screen name".

May 28 02:40 PM

[Come on Guy...:]

You guys need to advertise for them! I have a bunch of videos up on youtube. if you search for Eminem Relapse, my video comes up as the sixth or 7th one I have over 170,000 views! I just mention how Eminem has his own radio station on Sirius! So many people dont know this and he has millions of fans across the world! Lets advertise for SIRIUS!! Post Videos, etc.. Just advertise!

May 28 03:42 PM

[relmar2003:]

Whats with all my insults? I always insult bashers like you. I dont like bashers. I like debaters who are bearish, sure. Lets hear your case. People dont want it, sounds like you could possibly still be educated on a 1st or 2nd grade level. So I doubt you even know the market. Probably think its a big tent in New York were people come in and out buying stocks from under a tent. You know, the stock market. Where you go get stock, right? Right BC? Probably think Wall Street is an actual street that is on top of a wall. And cars can drive off it and die.
LOL LOL LOL

May 28 03:46 PM

[CoolHead:]

Relmar,
I am buying again at these prices. The SP broke the lower 30 cents barrier due to the auto BK news. I have kept my core at $0.20 and I am using some of my dry powder to buy back in now at these prices.
You are right, you can play with the swings up and down with this stock but in the end medium to long term it has much more upside potential than downside.

Go Relmar you and connorport are good at keeping these bashers honest!


On May 28 03:43 PM relmar2003 wrote:

> BC gay boy, your posts are comical. I buy and sell many stocks I
> own. You said sell at .63? Thats useless infomation, from you. You
> also said sell at these prices.
> .63, .62, .61, .60, .59. 58, .57..
> .40., .32, .31., .30...
> So where do I buy?
> O wise one.
> SInce you know. SInce you refuse to give a buy recommendation, you
> are simply a basher, you arguements are useless, and no one listens
> to you. I can call down down down all day too. Did you give the buy
> at .05? .12? .17? .40? .50? .60? No you didnt. Hence your useless.
> Also you bashing is useless too. But keep posting your garbage Ill
> be right here every step of the way to make you look like a fool,
> not that you need any help. Heres some USEFUL calls.
> Buy at .05. Buy at .12. Buy at .17. Buy at .32. Buy at .40. Buy at
> .44. Sell at .62. Sell at .52. Buy at .40. Buy at .34. Ive been wrong
> twice so far(only for a few days by the way, you have been wrong
> since post number 1.) I also suggest holding powder for drops. All
> good advice designed to allow the best chance of making money on
> this stock vs. the buy and hold strategy. SOme like buy and hold,
> I believe in a combination of the two. A core, bought low(mine is
> at .17 and .30-.32 cents). Another is a over core position(sold at
> .62, and .52) respectively, on the last two spikes. Your advice.
> Sell. Tomorrows advice. Sell. Next weeks advice. Sell. If this stock
> was .20 cents would you recommend a buy? No, of course you wont.
> Why your one sided, and useless. If you dont stop posting here, every
> day you prove more and more why you are here. Now, you gain credibility
> by backing up your arguments with facts. You have none. You dont
> even know their ticker symbol I bet. Do you even know what a satellite
> is? Bet you think they are magic balls in the sky, your mom told
> you about once.
> Your an idiot. Period. Go away. Actually stay, Im beginning to like
> making fun of you. Please post more actually . Dont leave. Make my
> case every post you make. Love it!!

May 28 11:50 PM

[jmsithy:]

I as well going to buy back in around the mid to lower .20 as well with contributing another couple hundred dollars to boost my stock Qnty just need to know when the bottom is going to happen for this stock. Got out at .30 after giving it a chance for about .05 I am still thinking that this stock will payoff, but not right now.


On May 28 11:50 PM CoolHead wrote:

> Relmar,
> I am buying again at these prices. The SP broke the lower 30 cents
> barrier due to the auto BK news. I have kept my core at $0.20 and
> I am using some of my dry powder to buy back in now at these prices.
>
> You are right, you can play with the swings up and down with this
> stock but in the end medium to long term it has much more upside
> potential than downside.
>
> Go Relmar you and connorport are good at keeping these bashers honest!
>

May 29 09:13 AM

[connorport:]

You wont see this stock in the 20's. If you can get in in the low thirties then i would go with it. To all the bashers who know nothing about the assets that lay in wait for debt coverages, if you guys were asked a few months ago if this company would be BK you would probably have said yes and if you were asked a few months ago if GM would go BK you would probably have answered no! It seems we are in a volatile market. But SIRI is here still and the second oldest company listed on the DJ is circling the toilet bowl with the leftovers and the handles been pulled. I would say thats a pretty good sign for this old mule who's been able to make deals happen for some unknown reason to you guys who don't do the research necessary to post a reasonable blog that has defense. We shall see when the day of reckoning comes! WOW! That sounds like a line from some marvel comic movie but it works.


On May 29 09:13 AM jmsithy wrote:

> I as well going to buy back in around the mid to lower .20 as well
> with contributing another couple hundred dollars to boost my stock
> Qnty just need to know when the bottom is going to happen for this
> stock. Got out at .30 after giving it a chance for about .05 I am
> still thinking that this stock will payoff, but not right now.<br/>

May 29 03:41 PM

[Titus Andro...:]

I've been getting lucky with SIRI buying on the dips and selling when it gains a couple cents. Chump change but it adds up. I'm just playing with profits. Just wait for the dips. It's so easy. Free money. Anyone who is long with this stock is going to have to wait a very long time (years), so why not make money while waiting.

May 29 04:38 PM

[cos1000:]

This is what happens when a site doesn't have any moderators.... Rather than the comments becoming a discussion about the article and realities of the companies in question, it degrades to the IQ of an idiot who keeps changing his screen name.... Seeking Alpha Clean Up this BS......

May 29 05:06 PM

[CoolHead:]

Amen to that Cos1000! I do miss you around Seeking Alpha...not like the good old days when you, Relmar2003, and the gang where posting more often.
Connorport has taken on most of the bashers by himself for a while now and done well.
Cos1000 what do you see as the next move with SIRI? The bashers seem to be laying low for now and the GM BK is already internalized....I would assume that the MMs and the bashers will be back though. Your take?


On May 29 05:06 PM cos1000 wrote:

> This is what happens when a site doesn't have any moderators....
> Rather than the comments becoming a discussion about the article
> and realities of the companies in question, it degrades to the IQ
> of an idiot who keeps changing his screen name.... Seeking Alpha
> Clean Up this BS......

Jun 04 03:09 PM