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Summary

  • Sirius adds another $2 billion to buyback.
  • Return to debt markets likely.
  • What's next?

After the bell, the board of Sirius XM Holdings (NASDAQ:SIRI) announced that it had authorized its third $2 billion share repurchase program in just over a year and a half. The shares responded favorably to the news, trading as high as $3.46, up six cents from the close, although they had settled back to $3.42 by the end of the after hours session.

As of the end of the first quarter, the company still had $1.7 billion remaining on the second share repurchase program. The new authorization suggests that the company may have purchased a large number of shares at attractive prices during Q2, using up a significant portion of that remaining $1.7 billion.

Investors in the company also should be aware that during the recently completed second quarter, the company had borrowed an additional $1.5 billion. However, the $1.5 billion and the expected cash flow from operations would still leave the company far short of funds to complete both the $1.7 billion and the new $2 billion authorizations. I am expecting another debt offering before the end of the year.

Since Liberty Media (NASDAQ:LMCA), the majority owner of Sirius, had announced that it would be splitting off its cable assets into Liberty Broadband, I had been expecting that Liberty would enter into another share sale agreement with Sirius. The purpose would have been to raise additional cash and move it into the broadband unit prior to splitting the company. However, since the shares for the new broadband went ex-distribution earlier this month, that appears not to be the case.

It will be very interesting to see what plans Liberty has in store for the company that will be comprised mostly of its Sirius share holdings (~$11 billion based on data released through June 30th), key stakes in Live Nation (NYSE:LYV) (~$1.3 billion), the Atlanta Braves (estimated at $0.8 billion) and various other smaller holdings. In addition to the Sirius earnings release on July 29th which will include updates on the share repurchase program, investors would be well advised to pay attention to the Liberty August 5th earnings release and subsequent conference call.

Source: Sirius XM Announces Increase In Share Repurchase Program

Additional disclosure: In addition to my long positions, I have January 2015 $4 covered calls written against portions of my long positions in Sirius XM. I also trade blocks of Sirius XM on a regular basis. I have no positions in any of the other stocks mentioned in this article.