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By Brandon Matthews

By now many are aware that Sirius XM Radio (SIRI) will soon receive a letter of non-compliance from the NASDAQ regarding its sub one dollar share price, a fact not lost on short sellers last week, as they hope to turn event risk into profit. The media will no doubt help these short sellers by referring to the non compliance letter as a “delisting notice,” helping to fuel investor fears. There are no doubt writers who already have their “delisting” articles ready to publish as soon as the news breaks. It’s typically a good short bet as a company faces such a notice. Some may look at this event risk as offering the potential for short sale gains. I look to this event risk as two separate events. The first event is the letter itself. The second event is the short covering that will accompany it, providing a means to acquire shares at discount prices. Sirius XM Radio is not your typical troubled company.

As the week begins, E-Trade and TD Ameritrade customers are receiving a message that states:

*Nasdaq FSI: *Deficient: Issuer Failed to Meet NASDAQ Continued Listing Requirements.

Actually this is not new news, as Sirius XM Radio had already been placed on the non compliance list when an independent director was named to the Obama Administration, resulting in a temporary board vacancy. Sirius XM received a letter in July, and then submitted a plan to the NASDAQ to fill that vacancy at the next meeting of shareholders. There was no sell-off created from such a letter because in the end, it is a non event that will be dealt with in due time, due time meaning that the post will be filled before there is any chance of NASDAQ delisting.

As another letter is being prepared to warn about the minimum bid requirement, short sellers may find that the event they hope will cause a selling situation may leave them a bit short in the end. As I stated, this is not going to be a delisting notice but a warning letter that will give the company 180 days initially to regain compliance, and another 180 days following that to appeal. In other words, any potential delisting or delisting notice for that matter is still a year away.

This is not something that the company is ill prepared for. In fact, with the exception of the one dollar minimum bid, Sirius XM Radio remains compliant on all other required metrics and not by a slim margin. More importantly, the company has been preparing for this event for some time, and has even filed a petition with the Securities And Exchange Commission to have this requirement waived in lieu of the company’s market cap, which stands at $2.51 billion, dwarfing the exchange's requirement of only $15 million.

With a reverse split already authorized as a last resort, there is absolutely no chance that the company will ever receive a delisting notice or be delisted. Let me say that again for the benefit of those who may be fearful of things they may read this coming week. NO CHANCE! And therein lies the problem for short sellers. Because the company is financially stable there is a higher probability than not that the company’s shares will recover to the required one dollar minimum bid, as Media Analyst Tuna Amobi of Standard & Poor's Equity Research has increased his 12 month projection to $1.00.

Position: Long SIRI

Source: Sirius XM's Nasdaq Non-Compliance Opportunity