Take me out to the ball game,
Take me out with the crowd;
Buy me some peanuts and Cracker Jack,
I don't care if I never get back.
Remember the series of GM commercials: "Baseball, hotdogs, apple pie and Chevrolet"? So what could be better than SiriusXM Radio (SIRI) announcing that it has expanded its programming line-up of major league baseball games for users of the service over the Internet and through mobile devices? (Well it would be nice if all the factory installed receivers could pick up the games, but that's beside the point.) The company will now offer live play-by-play coverage of very major league game with every team's own broadcasters. It's great for the fans of America's past-time.
It's been a few years since I attended a major league baseball game. Most of the ballparks I saw games at are gone. The Polo Grounds, Shea Stadium and even Yankee Stadium are gone. The days you could sit out in the bleachers and enjoy hotdogs, peanuts and beer without taking out a loan from your local banker are a distant memory. The calls of "get yer bee-ah, hee-ah" yelled by the vendors as they patrolled the stands with cans of Rheingold and Schaeffer are also gone as one is forced to leave their seat and stand in a long line beneath the stands while choosing from light, domestic and imported beers. These days you can buy a couple of shares of SiriusXM for less than a cup of Coors (TAP) at your local park. And a couple of more shares on top of that if you want an upgrade to a Heinekin (HINKF.PK).
Now we have folks on Seeking Alpha telling you to buy or sell your shares of Sirius because Liberty Media (LMCA) is paying $2.15 per share. Instead of insults being hurled at the visiting team's outfielders or the umps, we have insults hurled at authors and commenters who write that $2.15 is a floor or a ceiling price for the shares. I have been quoted for writing "I do not expect them [Liberty] to overpay for the acquisition."
Some readers are led to think that means I must see $2.15 as a floor price for the shares since I wrote that I didn't expect Liberty to overpay. This is not the case. Much more recently, in an article published on May 7th, before the revelations by Liberty, I discussed my view of fair value of Sirius in light of the first quarter results.
Are the shares priced correctly? Many bulls writing articles and comments on Seeking Alpha seem to think Friday's closing price of $2.16 represents a great buying opportunity. They will point to cash and Free Cash Flow (FCF) or the unrecognized value of the spectrum or the NOLs or the monopoly. Others will claim there is market manipulation and short sellers conspiring to keep the share price down.
I look at the current and projected FCF per diluted share and see a share price I consider reasonable. It's a price that will continue to grow at a rate faster than the general market. It's also a price that is held in check by the uncertainty about what Liberty Media will do with its significant stake in the company.
If I saw $2.16 as fair value, has anything changed? Sure, the uncertainty around Liberty Media has changed and some 360 million shares have been taken out of the float. And even with that, the price is still hovering around $2.16. Is it a great buying opportunity? It depends on your time horizon and tolerance for risk.
Summary
I still think the $2.16 is a good approximation of fair value. Liberty and the market seem to agree. The value will continue to grow, and in my view, that growth will be a few percentage points above the market growth. Will I be rushing in to buy more at this price? Not unless the purchase is for a short term trade or part of an option strategy (which was discussed in the article where the Liberty won't overpay quote came from). My long position in Sirius is at a level where I'm comfortable.
Hey, I may even sell a dozen shares and go to my local liquor store and pick up a case of that Heinekin or a local craft beer. And if I sell those shares, am I now a bear?
Disclosure: I am long SIRI. I have $3 January 2013 covered calls against most of my Sirius position, as well as some $2 and $2.50 January 2013 covered calls. I may initiate (or close) a buy stock/sell option position in Sirius, discussed in another article, at any time. I hold no positions nor do I currently plan to open a position in Liberty Media.
