Echoing the seemingly unheard sentiments of the knowledgeable investors in Sirius XM (SIRI) and to the dismay of the shorts who are currently in control, SIRI will not be delisted.
Recently, I have received a significant amount of questions in regards to the delisting so I wanted to briefly explain why I am adding to my position rather than selling. Mel Karmazin explained this issue during the latest conference call from the last earnings release, stating with complete confidence: “There is absolutely no concern about SIRIUS XM continuing to be listed and traded on NASDAQ.”
Even with that being said, panic has set in among longs, which is reflected in the oversold PPS at the moment. The shorts have presently taken control of SIRI and have pushed us to test support levels around $.80 twice over the past two weeks. The first attempt was nearly successful for the shorts as we briefly broke under $.80 before a nice bounce towards $.88 and a very short-lived move over $.90. This was again met with pressure from the shorts as delisting concerns continued to mount.
Panic has set in among some which allowed shorts to push SIRI down to test support at $.80 once again. This time we barely broke under $.82 before we bounced back which is very encouraging. However, the more often we test support, the more likely we are to break it. Let us hope that was our final test of $.80.
I would have liked for us to be pushing close to the $1 mark soon but, I do not foresee that happening until these delisting concerns are resolved with an official extension. I still expect us to achieve $1 without an R/S but now that seems to be extended a few weeks longer. At current levels, SIRI provides a favorable risk/reward play since the odds of them not receiving an extension are practically nonexistent.
Every now and then I tune into Jim Cramer’s Mad Money to see what he is preaching these days and tonight I happened to catch the last few minutes which were related to delisting stocks. The recap can be found here. Coincidentally, Cramer brought up how some stocks do not get delisted when they should be because they make the exchanges significant money. Why would an exchange want to rush to delist a stock that they are making considerable money on? Cramer used the example of how the former General Motors stock was allowed to trade when it should have been delisted. Cash is king, if you did not already know that. SIRI is a very highly traded stock, making it very valuable at the moment. Delisting will not give benefit to the exchange.
If SIRI does not receive an extension, they will move for an R/S, which again, avoids delisting. I am always concerned with a negative EPS stock enacting an R/S though so I do not want them to take this route unless absolutely necessary. Despite the fact that it is not correct to value a stock based on the PPS alone, the psychological view of a high PPS with a negative EPS makes selling seem more reasonable to many and shorts will surely take advantage of that. If they can wreak havoc on message boards with delisting concerns, this will prove simple to create worry.
With SIRI being such a favorite among shorts, I would not be surprised to see them beat the PPS down a bit from the final R/S price. However, because of the current pressure on the PPS related to delisting concerns, the R/S being enacted would catch many off guard and could catapult the stock for significant short-term gains. Soon thereafter, I expect the shorts will regain control or at least battle the longs back slightly. These overbought levels would be brief and not sustainable without strong institutional buying. At this time I would look to pare back my position into strength and consider buying back after the dust settles if this is indeed the path taken to avoid delisting. Since I fully expect the extension, I do not anticipate that pathway will be taken. It is always wise to have a flexible plan though, and whichever path is taken, the longs have a favorable play from current levels.
Lately, I have continued to add to my position near $.80, per my StockTalk updates, as that level seems to be holding up relatively well. Even with our light-volume week in the markets, SIRI longs have put together a strong defense so I will continue to add if presented with cheap prices again. Do your own research to see if you agree. Good luck out there.
Disclosure: Long SIRI but positions can change at any time