By Brandon Matthews
There was a time not too long ago, that the media was used by hedge funds to assist those with short positions in Sirius XM Radio (Nasdaq: SIRI). Looking back, I can make this statement with a high degree of certainty following Overstock.com’s (OSTK) victory over short selling hedge fund, Rocker Partners. The suit had claimed that the fund used various media sources to manipulate the company’s stock and the settlement for $5 million would suggest that the suit was indeed valid.
For the past several weeks, I have found myself questioning the motives of many hatchet type “news” articles, that I had thought might be a sign of a potential short selling attack against Sirius XM Radio. The problem has been that short interest continues to decline and no amount of negative press has been able to affect SIRI shares in a manner that would suggest a bear raid on the company is underway. Even a concerted attack on Sirius XM Radio by Jim Cramer’s TheStreet.com failed to have any negative effect on Sirius XM shares.
If the negative press is not designed to depress the price of Sirius XM Radio shares, what then would be the motivation behind them? Anyone who follows Sirius XM Radio has a clear understanding that Howard Stern has another year left on his contract. Howard Stern has made it clear on his show that he would not mind continuing to do his show, but would certainly like to do the show from his home much like Rosie O’Donnell currently does. Anyone who has followed the careers of Howard Stern and Mel Karmazin knows that the two always come to terms, and Karmazin has made it clear that the company is willing to pay what is required to retain its top talent. Its top talent is Howard Stern.
To continue to write about potential events well into the future is suspect. The media has chosen to create an atmosphere of doubt as to whether Howard will continue his show on Satellite Radio. All mysteries require the establishment of motive. I believe that motive was made clear when an alleged Satellite Radio consumer had filed a baseless lawsuit against Sirius XM Radio that no reputable lawyer would have taken on. News of this suit was leaked to the Wall Street Journal and Reuters late Tuesday night. I suspect the news was intended to be spread throughout the Internet. The plan seems to have backfired in that even Internet bloggers recognized that the event hardly qualified as news.
Why then would the aforementioned major news publications write about such nonsense as if national security depended on it? Let’s look at the lawsuit briefly. For unknown reasons, a consumer who could easily cancel his subscription to Satellite Radio is upset over a $1.98 royalty fee. So upset in fact, that he hired a prestigious New York law firm at rates between $500-$1000.00 per hour to fight against it. I suspect the fees are being paid by the entity most likely to benefit from this negative press, as I find it unlikely that a law firm would accept a case that it would surely lose without substantial financial consideration.
Occam’s razor states that the simplest answer tends to be the best one. This was made clear when yet another Wall Street Journal article was released Tuesday which cast doubt on Howard Stern’s future at Sirius XM Radio. Like any good mystery, the more pieces you have, the easier it is to establish a pattern and put those pieces together. I believe we are witnessing a counter-offensive by the terrestrial radio lobby in response to Sirius XM Radio’s return to positive subscriber growth and aggressive marketing campaign.
The message being sent is not being targeted to investors. Rather, it is intended to fall on the ears of current and potential Satellite Radio subscribers. The message being sent to consumers by these negative media attacks is that Sirius XM Radio is overcharging its customers and that Howard Stern may be leaving. Although neither is true, this can have devastating effects on current decisions on whether or not to subscribe. New subscribers may fear being overcharged and may decide to wait to see if Howard Stern renews his contract next year. This can also lead to existing “die hard” Stern listeners opting for shorter terms due to the same imagined fear.
I have made a personal decision, that this type of smear campaign cannot continue unpunished. I will be giving Satellite Radios as gifts this year to everyone on my gift list. With some radios priced as low as $29.99, it's an easy way to give a gift that truly keeps on giving, and sends a message to terrestrial radio that I will not stand for further manipulation at its hand.
Position: Long SIRI