Sirius Radio: Glowing or About to Burn Up?

Lying under the Midwestern night sky—free of light pollution—I watched a satellite pass over and could not but wonder if that brief glimmer of light was but a foreshadowing of Sirius Satellite Radio’s (SIRI) recent run-up in price. SIRI has doubled in the past 3 months—while the broader indices have gained some 14%. Inclinations suggest that SIRI experienced an undervaluing greater than the broader markets.

But did it? The fundamentals are much less free of pollution than the Midwestern sky. With 3.9 billion shares outstanding, the current PPS puts SIRI market cap at $2.93 billion—or 39% SIRI claims that its current assets are worth: $7.5 billion.

The major problem with this (asset value) number is that $1.8 billion falls under the intangible assets of Goodwill (separate and unrelated to FCC licensing fees). For comparison—Google’s (GOOG) intangible Goodwill is $4.8 billion (or 15% total asset value), and Coke’s (KO) Goodwill runs $4 billion (less than 10% total assets)—SIRI’s $1.8, a whopping 24% total assets, runs far outside the realm of acceptability.

Graciously granting SIRI a comparative right equal to Google’s (very graciously!), a grant of 15% goodwill-to-asset value, this brings SIRI’s Goodwill down to $1.12 billion and total asset value to $6.8 billion. But that’s still only half the picture. Outstanding liabilities are $7.3 billion; and total debt currently runs $6.73 billion—the majority of which is at rates of more than 10%. (Outstanding cash obligations for the next 6 months are $749,000, and $871K in 2010, $1 billion in 2011, $900K in 2012, and a whopping $2+ billion in 2013.)

Even if the PPS reaches $1 (a market cap of $3.9 billion, minus further dilution), or even passes that mark, the constant threat of Liberty Media’s conversion of their 12,5 million Class B shares—an option come Feb 2012—looms on the horizon, and would amount to a 40% total ownership of SIRI. This forebodes either a) a necessary reverse split in order to reduce total shares outstanding or, more likely, b) further dilution. Keep in mind—this is a second lien provision.

Could the recent run up in price be a result of the “Cash for Clunkers” program? Unfortunately, the Clunkers program has done nothing to promote long-term economic growth and stability. Other than spend over $3 billion US and increase the amount of trash the US produces—it merely invited people out of a paid-car situation into a payment-plan option. Many US manufactured vehicles come with a 6- or 12-month free subscription to SIRI. But unemployment hasn’t gone down. Even if it’s nearing a bottom, there are still far too many people looking for work than can find it. So we are right to ask—how long will people pay extra for satellite radio, with subscriptions running $11.99 to $16.99 monthly?

Could the increase in price be related to the pending iPhone antenna? It could be—but that’s a lot of hopeful speculation for something that’s just a possibility, especially when one takes into consideration the poor response to SIRI’s iPhone (mobile) app.

Could the increase be due to increased subscribers? Actually—no! Fleet based revenue has declined over the past 3 and 6 months. One shouldn’t expect that to turn around, with comments like this from leading rental companies: “While we continued to face sharply reduced demand for vehicle rentals in the second quarter, rental volumes did stabilize, and the actions we took to keep fleet levels in line with demand allowed us to achieve a stronger-than-expected 7 percent increase in domestic time and mileage revenue per day" (Ronald Nelson, Avis Budget chairman and CEO). The key phrase here is “keep fleet levels in line with demand.” Translation—“reduction.” And I’ll refer you to current US automobile sales to see how that vein is faring.

Then there is the problem of hardware inventory, which is up significantly over the past 6 months—yet another indicator of less—not more—demand. To add insult to injury, what does it say about SIRI that it is dependent upon a bankrupt company to launch its next satellite? Even SIRI’s recent royalty revenue stream from SIRI Canada seems little more than a play on the strong Loonie and weak US$. (SIRI owns 49.9% of Sirius Canada, and 23.33% in XM Canada).

Try as I might—I can’t make fundamental sense out of a stock that has doubled in 3 months, is struggling at the core, and has more debt than it knows what to do with. Looking for the bright spot in SIRI’s quarterly report is like…well, like trying to spot a fast-moving satellite in the Midwestern sky. There is always the chance of finding one.

Just be mindful that it’s most visible when burning up in the atmosphere.

Disclosures: no positions (long or short) held.

Comments

[SIRI-Doom:]

Hay drunk, read it again!!!!!!!!!!!!!!!


On Aug 25 08:54 PM homer985 wrote:

> The post below is incorrect information... that is in regards to
> market value... Sirius is currently under the minimum bid price of
> $1. That rule was suspended for the better part of the last year,
> but was reinstated on August 1st. After 30-business days, companies
> with bids under $1 will receive non-compliant letters in the mail.
> The date of this right now for Sirius is September 12th.
>
> Here is the details I explained last night on Yahoo:
> messages.finance.yahoo...;tid=4443328&m...
>
>
> The timeline is here:
> messages.finance.yahoo...;tid=4375491&m...
>
>
>
> ~~~~~~~~~~~~~~~~~~~~~

Aug 25 09:22 PM

[464217:]

Wait no i read it wrong but ur still an idoit

Aug 25 09:23 PM

[464217:]

I thought he ment the below statement was the statement you made I was wrong but your still an idoit

Aug 25 09:24 PM

[SIRI-Doom:]

LOL

Aug 25 09:26 PM

[SIRI-Doom:]

The rule was 10 days trading over a buck to reset the clock. Homers post indicates one day close. I hope he is correct. It would give a few days...


On Aug 25 08:58 PM SIRI-Doom wrote:

> The news of a delisting Nasdq warning letter will nose dive SIRI
> sp.
>
> It does NOT matter in the near term what happens with the rev-split.
> The news is the danger. Media is going to be all over it…
>
> My current plan is to sell now and come back after the nose dive.
> The potential of 30 to 80 percent increase in shares for the same
> near term money is attractive. The risk is will it come back before
> the split happens (pre split trading days).

Aug 25 09:33 PM

[SIRI-Doom:]

23-Jun-09 Barrington Research Upgrade Mkt Perform Outperform

LOL anyone can upgade to outperform after it has already outperformed....

LOL heheheh What a joke these anil-ists have become...

Aug 25 09:43 PM

[R A F:]

All this BS about a reverse split is purely "fear mongering". Given the likelihood that SIRI will be above 1.00 within the next six months, there is little reason to expect a reverse split.
Even in the case of a reverse split - there is little to be concerned about. Take a look at the history of Priceline, which had a 1 for 6 reverse split in June 16, 2003. The stock traded around 25.00 on the first day and by 9/1/03 the stock was around 39.00. Today, Priceline is near 152.00. Not bad for a stock that underwent a reverse split. Is this what everyone is so afraid of?

Aug 25 09:43 PM

[homer985:]

It is "one" day, while they are in the 30-business day cycle -- because they are not "non-compliant" yet. This is where they are now.

If they become non-compliant (after September 11, assuming still under $1), they are given the 180-days to become compliant again and sent the notification. To become compliant, they must then have the closing bid above $1 for 10 consecutive sessions.


~~~~~~


On Aug 25 09:33 PM SIRI-Doom wrote:

> The rule was 10 days trading over a buck to reset the clock. Homers
> post indicates one day close. I hope he is correct. It would give
> a few days...

Aug 25 09:52 PM

[SIRI-Doom:]

Cool, thank you again.

All we need is just one day to close over the buck untill Sept 12.

So, we have a few more days. I wish we could dig up some good news. I don;t see this Expo driving a buck. But we can hope for a few more days...


On Aug 25 09:52 PM homer985 wrote:

> It is "one" day, while they are in the 30-business day cycle -- because
> they are not "non-compliant" yet. This is where they are now.
>
> If they become non-compliant (after September 11, assuming still
> under $1), they are given the 180-days to become compliant again
> and sent the notification. To become compliant, they must then have
> the closing bid above $1 for 10 consecutive sessions.
>
>
> ~~~~~~

Aug 25 09:58 PM

[SIRI-Doom:]

I just want it over and off the table. Tiered of the greef.

I see two plays here.

1 Sell before the drop on the news of the letter. Buy on the dip after the news. and, Hold pre splt trading days and hope for some gain. Sell on any drops as we get close to the split.

2 Buy on the dip that mostly always happens after a rev-split...

It could be the avg down chance the old pre-merger longs realy need. But, very high risk if you don't watch close.

On Aug 25 09:43 PM R A F wrote:

> All this BS about a reverse split is purely "fear mongering". Given
> the likelihood that SIRI will be above 1.00 within the next six months,
> there is little reason to expect a reverse split.
> Even in the case of a reverse split - there is little to be concerned
> about. Take a look at the history of Priceline, which had a 1 for
> 6 reverse split in June 16, 2003. The stock traded around 25.00 on
> the first day and by 9/1/03 the stock was around 39.00. Today, Priceline
> is near 152.00. Not bad for a stock that underwent a reverse split.
> Is this what everyone is so afraid of?

Aug 25 10:07 PM

[464217:]

Ok now Im confused now with what i read in other articles and this fourm. With the information I had gathered i thought they recieved the letter on the 12th of Sept and then they had 180 days for the stock to reach 1 dollar. I do not understand why siri doom you are stating they will tank on sept 12. Are you saying at sept 12 if its not 1 dollar they will get de listed and or have to use their rev split. I believe after the sept 12 for the 180 days the stock can easily reach 1 with out a rev split. Please someone clear this up for me

Aug 25 10:34 PM

[464217:]

RAF the majority of the time a rev split hurts the stock holder especially those with a signifcant number. There are instances where it helps the stock but most of the time it does not help the share holder . I think a reverse split would actually be good since the stock is manipulated so much and shorted but as a stockholder of the company i would not want to see that happen. I would probably never end up gaining the amount of money i could before hand

Aug 25 10:38 PM

[scots slant:]

Scot's Slant here. 464217 don't worry about a "delisting" letter. It doesn't mean jack. The person who keeps screaming that the world is ending because of a delisting letter is a reincarnate of the boy who cried wolf. In my uninformed opinion, It won't make a difference one way or the other.

By the way, there is one more thing: Do not follow any advice from the person who uses this post to spread doom and gloom. If that person knew what they were doing, they would not have dumped their life savings in one stock in the first place.

Scot's Slant

Aug 25 10:49 PM

[SIRI-Doom:]

The news of a delisting Nasdq warning letter will nose dive SIRI sp.

It does NOT matter in the near term what happens with the rev-split. The news is the danger. Media is going to be all over it…

Aug 26 01:40 AM

[SIRI-Doom:]

What Slant? YOU CAN NOT ADMIT YOU WERE WRONG!!!

For two weeks you have been saying it is not true. For two weeks you have been bashing me and telling folk I am lieing.

Now, you admit you knew and say it does not matter... LOL

Your a SIRI paid sales person. Just admit it and shut up... YOU ARE WRONG AGAIN!!!!!!


On Aug 25 10:49 PM scots slant wrote:

> Scot's Slant here. 464217 don't worry about a "delisting" letter.
> It doesn't mean jack. The person who keeps screaming that the world
> is ending because of a delisting letter is a reincarnate of the boy
> who cried wolf. In my uninformed opinion, It won't make a difference
> one way or the other.
>
> By the way, there is one more thing: Do not follow any advice from
> the person who uses this post to spread doom and gloom. If that person
> knew what they were doing, they would not have dumped their life
> savings in one stock in the first place.
>
> Scot's Slant

Aug 26 01:46 AM

[SIRI-Doom:]

The news of a delisting Nasdq warning letter will nose dive SIRI sp.

Media is going to be all over it…

Aug 26 01:48 AM

[majorlabel:]

I can only comment on my situation. I was a long time listener to XM Radio and happy to pay for two receivers which at the time was a reasonably priced approximate $12.00 month for both. Then Sirius merged and consolidated.
Losing many of my favorite stations and replacing them with poor excuses for similar genres (replacing ALT Country with Merle and Waylon is not even close !).
Then they raised the monthly prices to close to $20 a month clinched the deal...goodbye Satellite Radio, hello internet radio...possibly even an HD radio...but continually raising monthly subscription charges and giving entire channels to individual artists has killed Sirius/XM.

I ended up buying a USB stick with 100's of internet stations preprogrammed for about $15.00 at FRY's.

You can gamble with investing on this turkey stock, but in the end, it is just gambling.

Aug 26 02:22 AM

[SIRI-Doom:]

On Aug 25 08:54 PM homer985 wrote:

> The post below is incorrect information... that is in regards to
> market value... Sirius is currently under the minimum bid price of
> $1. That rule was suspended for the better part of the last year,
> but was reinstated on August 1st. After 30-business days, companies
> with bids under $1 will receive non-compliant letters in the mail.
> The date of this right now for Sirius is September 12th.
>
> Here is the details I explained last night on Yahoo:
> messages.finance.yahoo...;tid=4443328&m...
>
>
> The timeline is here:
> messages.finance.yahoo...;tid=4375491&m...
>
>

On Aug 25 05:00 PM RealityofSiri wrote:

> I posted this on another article but apparently Siri Doom thought
> he could push his lie on a different article:
> In regards to delisting NASDAQ has decided to relax some of the deadlines
> ailing companies must meet to avoid delisting. Previously, if the
> company doesn't reach market value of the listed securities for 10
> consecutive business days, it is allowed 90 calendar days to regain
> compliance. NASDAQ plans on bringing the initial non-compliance period
> to 30 days. The company would then have 180 calendar days (as opposed
> to 90 calendar days) to regain compliance. If the company is still
> unable to regain compliance, it can appeal to a hearings panel, and
> if granted stay, the maximum extension is 360 days form the date
> of the staff delisting determination. – Source: Compliance Reporter
>
>
> ~~~~~~~~~~~~~~~~~~~~~

Aug 26 04:57 AM

[SIRI-Doom:]

Opps Links did NOT post correct. Here is the working links

Here is the details I explained last night on Yahoo:

messages.finance.yahoo...

The timeline is here:
messages.finance.yahoo...

Aug 26 05:04 AM

[SIRI-Doom:]

Links are from homer985 post confirming the NasDq delisting letter pending for Sept 12.

SIRI has only 11 trading days to close at or over a buck.

IMHO The letter and media attack will crash SIRI again...

Aug 26 05:09 AM