The shocker was that on 2/17/12, CEO Karmazin announced that he "has adopted a trading plan in accordance with Rule 10b5-1 of the Securities and Exchange Act of 1934. The transactions that will take place under the plan are part of Mr. Karmazin's strategy for financial planning in connection with his philanthropic efforts. "Under the 10b5-1 plan, beginning in April 2012, Mr. Karmazin is expected to exercise 60 million options to purchase Sirius XM shares. Shares underlying the options will be sold to cover the price to exercise the options and the remaining shares will be sold with the proceeds delivered to Mr. Karmazin."
Well, it is now April, and as promised, on Monday and Tuesday he sold two large chunks of his Sirius stock. These transactions of over 5 million shares each were enough to send the stock down to $2.16, the lowest price it has been since February of this year. However, for two days this brought all kinds of rumors and speculation as to who suddenly unloaded almost 12 million shares of stock. Some posts around the internet and on Twitter spoke of big investors dumping the stock. Sadly a lot of long term Sirius XM investors panicked and sold their shares, thinking it was crashing. The announcement Monday night that the $300 million Howard Stern case was dismissed saved the shares from dropping further on Tuesday. A Form 4 was filed this afternoon with the SEC showing that those transactions were indeed Mel's shares being sold:
|Common Stock||4/16/2012||S||5965800.0000 (1)||D||$2.1832||8500000.0000||D|
|Common Stock||4/17/2012||S||5514900.0000 (1)||D||$2.2299||8500000.0000||D|
|Common Stock||323947.0000||I||By 401(k) Plan|
This news about Mel's stock sale should bring a major sigh of relief to some Sirius bulls. However, a lot of investors took advantage of the bargain basement prices and added more shares to their portfolios. Now what we have to consider is that there will be 48 million remaining shares sold in the future. So expect more dips like this as it continues upward. It is important to note that a lot of Tech shares fell on Monday due to some fear and profit taking at Apple (AAPL).
These dips are excellent opportunities to pick up shares before the Sirius earnings conference call in less than 2 weeks. A lot of investors will buy shares right up to earnings and then sell before anything is announced in case a company misses its target earnings set by analysts. I would not recommend that with this company - especially this year. There are too many potentially positive outcomes that may send the shares soaring.
For instance, the sub count should be a lot higher than it was this time last year due to things like the new iPhone, iPad and iPod app available through Apple, the exceptional new car sales, and the introduction of the new portable Lynx at the beginning of Q1. If the subs are higher, then the revenue will be higher. This will cause both the P/E and Forward P/E to go up, making the share price go up. The new MLB agreement to stream all baseball games to the Sirius app and internet site, and the Chrysler announcement about some of the new 2013 models having factory installed 2.0 radios, will just add icing to the cake.
During the call we can expect to hear new information about the Liberty (LMCA) situation. There have been several articles and comments around the web saying that Liberty already has de facto control of Sirius and its board since there are 5 Liberty members on the 13 member board. This is absolutely not true. If it were true the Sirius board would have voted to support Liberty in this FCC application. That did not happen. The board clearly voted against Liberty.
The negative thing that could come out of this Liberty/Sirius dispute is that Sirius may take the share buyback off the table. I hope not, because a buyback, depending how it is structured, could be very beneficial for the share price. With all of the animosity there may be a big proxy fight at the annual meeting on May 22 in New York.
Disclosure: I am long SIRI.