The Real Story Behind Sirius Capex and EBITDA 50 comments
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By David “Newman” Phillips
With the Q2 Conference Call right around the corner for Sirius XM (SIRI), speculation has flared about the earnings roller coaster that will be released at 8 AM EST on August 6th, 2009. Some have been trying to estimate subscriber numbers, while at the same time pointing out that they don’t matter because the key measuring stick should be revenue growth. I am completely in agreement here. (I will mention though that I see the company surprising the street with fewer sub losses than predicted. I see them with a loss of 175-225k subscribers.)
For those who have read my articles, you know that I like to dig into what Mel Karmazin says at conference calls and pull out hidden meanings, much like I did with the subscription rate hike, which was confirmed by the company only weeks after my story. I have been mulling over a few comments for a while that seem to have gone unnoticed, even by the sharpest of minds over on the Satwaves Message Boards.
Many people will point out the fact that Sirius XM has projected a positive $350 million EBITDA before Capex. I am here to tell you today, folks, that you are mistaken. At NO TIME has Sirius ever projected $350 positive EBITDA before Capex. The projection that you are thinking of was actually $300 million EBITDA before Capex. That projection was made at the 2008 Merrill Lynch Media Fall Preview Conference on September 9th, 2008. Unfortunately, the audio for this conference is no longer available to hear the actual verbiage, but the Sirius press release is still on file (they do NOT mention Capex in the press release though). However, in the 2008 Q3 conference call, Mel actually changed that projection, though no one really picked up on it. In the transcript on Seeking Alpha, page 4 has Mel stating:
We have been asked when will we be EBITDA positive and not be a user of cash. Well, the answer is now very clear. It is in 2009 when we will have over $300 million of EBITDA. And after all cash expenses, including satellite expenditures, we will not have net cash outflow for the full year ‘09. And this positive trend will continue in subsequent years.
So there you have it, straight from the horse’s mouth. As early as Q3 CC, which was held on November 11th 2008, the company knew that 2009 would be a profitable, or at least break-even, year including Capex. What does this mean for shareholders? Well, the Q4 Conference Call is where Mel increased guidance, and raised the projected EBITDA to $350 million, and then again in Q1 where it was stated that EBITDA would be “OVER $350 million”. To avoid confusion, I will summarize a timeline:
- September 9th 2008: Merrill Lynch conference – Mel states $300 EBITDA BEFORE Capex.
- Q3 2008 CC: Mel makes the statement above about $300 EBITDA and net cash outflow even WITH Capex.
- Q4 2008 CC: Mel raises guidance to $350 EBITDA. No mention of Capex here.
- Q1 2009 CC: Mel again raises guidance to “above” $350 EBITDA. Again, no mention of Capex.
With revenue increases coming from rate hikes, best of both, internet surcharges, and the Apple (APPL) iPhone app subscribers, would it be prudent to expect cashflow to increase by (about) the same $50+ million?
I believe it is.
Disclosure: LONG SIRI
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IMHO over the last 11 months the manipulation from computers is not just speed as stated in the Times. Goldman Sacks uses routing of trades from desk to desk. They have computers connected at each access desk.
What seems to be happening is GS computers measure buying and selling at each desk. They route trades to the desk with least action on the target stock. The only cost is; (Routing to a desk does not keep others trading at that local desk from getting in the mix.)
Example up tic: A selling computer sells 50,000 shares in 100 blocks at .0005 more than current. It is routed to a desk with no action on the stock. The receiving computer is buying at .006 more that current.
GS can trade the same 50,000 shares back and forth in sync to tic the price up. They have no overhead because they are the access providers and do not get charged for the trade.
This is how Enron was operating. However, they paid for trades in volume and that is why Enron was caught so easy.
On Jul 24 08:30 AM R A F wrote:
> Added thought: This also ties into the SEC's handling of the uptick
> rule and naked shorting situation, as there is no way this front
> running by high speed computer trading could occur unless shorting
> could take place without restrictions. This front funning is being
> done within 30 milliseconds (0.03 seconds) and this "flash" time
> period would probably make such added considerations (uptick rule,
> having to confirm borrowed stock, etc.) a major barrier to this practice.
On Jul 24 09:27 AM between the hedges wrote:
> The days of Siri Doom will soon be over. He will soon be calling
> himself Siri Glory and loving the stock. Mel will go on a media/marketing/deal
> making blitz from now until Christmas for two reasons. 1. Get the
> stock above $1.00. 2. Get paid. Option to sell at $.43. Relmar is
> right. There are two many positives and the sellers appear to have
> left the building.
The only liar here is you. You make LOTS of comments and show no proof. That is because you fabricate alot of Bull in your posts. You are a liar and thief. Hope you are getting paid well to lie to people....or maybe you are playing their fear and panic for your own sinister purposes.
if not they are id twins-check out "wise one" on mess board on msn - siri
On Jul 24 03:29 PM between the hedges wrote:
> jmsithy: I agree. When GS wants it to move, it will move. Unless
> the qtrly rprt is atrocious, which I don't think that it will be,
> then it should move out of the .36-.45 handles.
"He had previously put $24 million into open market share purchases at much higher prices and felt that a $30 million exposure on his own money was sufficient incentive for him to make this merger a success.
His focus is on executing on the business plan as it has been since he arrived in 2004 just after Howard Stern signed his agreement with the company. The subscriber tally was 700,000 then, and the stock was selling in August 2004 for $2. It zoomed to $4 and then briefly to $9 after Stern and then Karmazin agreed to join. "
What other company that has been so closley link to Auto Sales has done so well??......
I would be impressed if you could identify any. The cash cow for Sirius was in the Automotive sector. Turning a business model around during normal economic times is difficult, but Mel is managing to achieve the paradigm shift in the worst economic times in 80 years.
Carping about how bad Mel is doing from their keyboard shows how little thought that person gives to how any business is run.
Two out of three domestic Auto giants go into bankruptcy. It would have been easier to follow the same course. Mel took the path least traveled. If you can't keep up with the concepts, stay off the path.
Too many times have I picked up a magazine, or read an article online refering to bad management. The Media thrives on bad news. Leave the gloom and doom to the professionals, they are better at it. And, they don't repeat themselves as much! I welcome opinions of the future prospects. The past actions of Mel, so far, have proven to be correct. Each passing day brings a media giant that will rival Viacom's influence. Mel has the experience!
All day biting my nails. I am getting drawn in with anticipation. My own words have been, “give it time”. Today I sit looking for a 38 sp in what would be an off cycle swing. If we are trading against the GS computer the cycle averages six days. So, why am I biting my nails?
I want to see SIRI go up. Playing against the Goldman Sacks Computer for a 3 cent spread feels more like mutiny.
Look close at the options chain for GS to cover its short hedge. It will not be a rush to cover. When they cover that hedge SIRI will go over 60 cents and fast.
(Remember - that Goldman Sacks Hedge is free money unless they fail to cover. This is shares not even issued but guaranteed for the original merger loan. The GS hedge is a legalized form of naked shorting. They will cover when they are ready to tic SIRI up.)
I have NO desire to change anyone’s mind about anything. All I want to do for people is make sure people have information from all sides. I am just like you and hope Mel is ready to move SIRI into the positive.
You make a convincing argument. However, your mention of Viacom show how little is known about Mel. Do your own research into the 3 companies Mel devastated and took private before bringing Viacom IPO after the smoke cleared 4 1/2 years latter. You will be surprised to find a trail of teary eyed stock holders and a mountain of lawsuits. Yes, Mel is a great man at what he does best.
As for his 30 million investments in SIRI, please think about betting a buck to make six bucks. Oh yes, Mel made money in back room deals and he will end his watch as SIRI CEO making money. Why do you think I am holing SIRI after all this corruption?
Let us go forward and hope for a big up tic. Yet, never forget the past because we need protection from the corruption of the past.
On Jul 24 06:10 PM Bababooie wrote:
> Mels Position is not to take the stock to a quick cap and then exit.
> He honestly wants to leave the Company in SOLID FINANCIAL shape.
> He does not want to do to Sirius, the same thing Nardelli did to
> Home Depot. Mel wants to keep the Stockholders and the customers
> happy. Forbes has a nice article about how the financing went down,
> and here is an excerpt:
>
> "He had previously put $24 million into open market share purchases
> at much higher prices and felt that a $30 million exposure on his
> own money was sufficient incentive for him to make this merger a
> success.
> His focus is on executing on the business plan as it has been since
> he arrived in 2004 just after Howard Stern signed his agreement with
> the company. The subscriber tally was 700,000 then, and the stock
> was selling in August 2004 for $2. It zoomed to $4 and then briefly
> to $9 after Stern and then Karmazin agreed to join. "
>
> What other company that has been so closley link to Auto Sales has
> done so well??......
> I would be impressed if you could identify any. The cash cow for
> Sirius was in the Automotive sector. Turning a business model around
> during normal economic times is difficult, but Mel is managing to
> achieve the paradigm shift in the worst economic times in 80 years.
>
>
> Carping about how bad Mel is doing from their keyboard shows how
> little thought that person gives to how any business is run.
> Two out of three domestic Auto giants go into bankruptcy. It would
> have been easier to follow the same course. Mel took the path least
> traveled. If you can't keep up with the concepts, stay off the path.
>
>
> Too many times have I picked up a magazine, or read an article online
> refering to bad management. The Media thrives on bad news. Leave
> the gloom and doom to the professionals, they are better at it. And,
> they don't repeat themselves as much! I welcome opinions of the future
> prospects. The past actions of Mel, so far, have proven to be correct.
> Each passing day brings a media giant that will rival Viacom's influence.
> Mel has the experience!
What did NOT happen is theory, conjecture, and conspiracy blogging.
Many people have said and I also believe Mel wanted to take SIRI private. Mel himself said, “SIRI would be easier to manage as a private company”. He made many such statements in 2007 – 2008.
So, let’s look at the play:
Mel declined private financing in December 08 without telling stock holders of the available financing. He then obtained authorization to issue millions of stock in saturation and also obtained authorization for a 10-50 to 1 rev split. All this was justified as an effort to save SIRI because he could not get financing.
On the face of the plan is a well known penny scam maneuver that could have saved SIRI. But, was saving SIRI the true intent? IMHO, when the CEO lies about financing he is working on a more sinister agenda.
The sinister agenda? The story has been said on these boards for 2 years.
Pay down debt in stock issue. Then, rev-split 50 to 1 and drive the stock down to 10 cents. Buy up the devastated stock for pennies. Take SIRI private and build a new Viacom. All this paid for on the back of poor beaten investors.
THORTED by a massive economic down turn,
Mel could NOT sell the new stock issue at a SP to pay down SIRI debt. Truly, he did NOT get the financing he thought for sure would be available. SIDE NOTE - Now enters the lawsuit of Mike Hartleb that publicly exposes the possible plan and history of Mel to take companies private for re-organization. (Say what you will about Mr. Hartlib but he did shine a strong light on Mel when it was most needed.)
What did NOT happen is a theory, conjecture, and conspiracy blogging. But, what did NOT happen may have saved SIRI stock holders from total devastation. The economic down turn may well have saved stock holders from a very sinister plan.
POSITION: I am long with 160,000 shares traded in and out to avg down. Currently holding 110,000 shares and waiting on SP of 38 cents to get a block of 50,000 back into SIRI for the hopeful up tic.
Mel could not rev-split because his share holder authorization is dependent on the NasD listing status. The $1.00 delisting rule was suspended because of the economic down turn.
Oh yes, the economics down turn saved SIRI stock holders from the rev-split and possibly a very sinister plan to take SIRI private on the cheap.
1. He just asked the common to make sacrifices to get the merger. He got the vote on the merger. He asked stockholders to hang in there until the deal was done. The economy took a crap, and the FCC allowed them to merge right into it. Fault... NAB. Merged one year earlier? No problem getting decent financing. It was available. bond market looks nothing like it did in July of 09. Let me explain something to you.
When you go to the bond market, you go at the time you need it. You take deals companies are getting. You get available money. You get bank problems. You get the current situation. Mel couldnt lock up anything until he asked for the money. Situations in the bond market change every day. When corporate bond market buying picked up, SiriusXM grabbed 520 million dollars of it. They got 11.25 percent. C just got like 9.75 percent. Less than 2 percent difference between C, and SiriusXM. One is the largest bank in the united states, the other is a struggling sat. radio company. So I think you understand now what Mel was facing in the real world. If the NAB filed to block the merger, the bond market was getting WORSE, not better. And give me the link on the Malone quote please.
You really should do your homework before you make acquisations. You keep spouting I have proof, you have nothing. I havent seen one shred of evidence to support your claims.
Back to the at these levels comment. He said it when it was trading around $2 a share. Go ahead. Take it private for 2 dollars a share. You can have them right now. So once again, do your research.
Malone basically acquired 40% of a company for nothing. So EVERY PENNY that stock is worth, is ASTRONOMICALLY valuable to him. DAAAAAAAHHHHHHHHHHHHHH...
Mel CANNOT BUY UP ALL OF HIS SHARES at the same time. The shares vest on a schedule. In fact, he can not buy ANY shares right now. The first time he CAN buy any of those shares is December 31st, 2010, at which time 25% (or 30 million shares) vest. SIRI DOOM never posts links to his so-called "proof", but I will on mine.
satwaves.com/forum...
The other thing? When he does "buy" the shares... HE DOES NOT DO IT ON THE OPEN MARKET. He buys them directly from the company because the company has set aside these shares for the bonuses. It will not affect the common stock or the market one little bit.
SIRI DOOM also states that Mel could not reverse split because it was dependant on NASDAQ listing rules. While Mel has said that the RS would be used only for listing requirements, they RS agreement that was voted on by all shareholders has absolutely nothing mentioning NASDAQ in it. In fact, it says they can RS at any time based on the judgement of the board of directors. Here is the link:
satwaves.com/forum...
You see, we at Satwaves.com have the facts. Anyone looking for the facts should come over and check us out.
I have offered to let SIRI Doom come over and plead his case and provide facts, yet he refuses to do so. Apparently, he provided his facts "months ago"... must have been privately where no one else ever say them. My links are listed above... where are his?
- Newman
satwaves.com
newman@satwaves.com