Sirius XM: Selling Panic Ahead

| About: Sirius XM (SIRI)

Liberty Media (NASDAQ:LMCA) is apparently on a buying spree for Sirius XM (NASDAQ:SIRI) shares. Richard Saintvilius, a writer for the Street, noted that Liberty purchased around 60 million Sirius shares last week and signed a $650 million contract to buy 302 million more.

The interesting thing is that this buying spree has not raised the price of Sirius stock. In fact, it has actually gone down. On May 15, 2012, it had actually fallen to $1.99 a share. So, what's going on here?

Earlier this month, the Federal Communications Commission told Mr. Malone that he will need to own at least 51% of Sirius to take over its licenses. Liberty already owns around 45%, but it will need more to take total control.

It looks like so much Sirius stock has been dumped on the market that it's actually sending the price down. That is good news for Mr. Malone, but bad news for Sirius shareholders. The price could actually fall further and make Mr. Malone's job easier.

The Street's Mr. Saintvilius has even speculated that Malone is somehow manipulating opinion in order to water down the stock price. That seems a little far fetched, given that Liberty apparently agreed to pay $2.15 a share for Sirius stock last week. That means it could actually lose money on this takeover attempt.

I expect an investor selling panic ahead. I believe Sirius stock will keep falling unless Liberty goes on another major buying spree, and soon. At this point, there's no reason for Liberty to buy more Sirius shares because they might go down further. It would make more sense for Liberty to sit tight and see how low it can fall.

It is possible that Sirius stock could start going back up if Liberty gets control. We don't know how close Malone is to owning the majority he needs, but it looks like he's fairly close.

The stock price could fall even further because some observers think that Sirius' CEO, Mel Karmazin, might sell some of the 49 million Sirius stock options he has. Personally, I don't think Karmazin will do that because those options would put him in a good position to make some sort of deal with John Malone. Even if Malone gave Karmazin the boot, the former CEO could profit if Malone pays Sirius stockholders with Liberty stock.

Stern could be Looking for Greener Pastures

Howard Stern seems to be planning a future that may not include Sirius satellite radio. His new gig on NBC's America's Got Talent show looks like an attempt to recreate himself as a nice TV host. In other words, Stern could be looking to leave Sirius and head to the small screen.

What Stern will do besides say nice things about ventriloquists is anybody's guess, but he seems to be contemplating a change. After all, he sued Sirius for $300 million, and even though the suit was thrown out by a New York state judge, Stern has appealed. Stern filed the suit because Sirius refused to grant stock options he says he was promised when he moved to satellite radio.

Stern's $80 million a year contract with Sirius will end in 2015, so this reinvention could be an attempt to improve his position for negotiations. It could also be an effort to enhance his appeal to other potential employers, such as Clear Channel (NYSE:CCO), CBS, and Pandora (NYSE:P).

It goes without saying that Stern could also be trying to make himself more attractive to John Malone and Liberty. It is not known whether Malone wants to keep Stern or take the network in a new direction.

If Stern does depart, it won't affect Sirius' stock price that much. Sirius shares are already trading at under $2 with Stern on board, so. So it is obvious that the market does not view him as that big of an asset. His departure probably would not have any effect on the stock price.

Sound Exchange Tries to Get Sirius Antitrust Lawsuit Thrown out

The Sound Exchange is trying to get the antitrust lawsuit that Sirius filed against it and a music industry trade association thrown out. The Exchange is the music industry group that collects and disperses royalties on digitally delivered music. Sirius has contended that the Exchange constitutes an illegal monopoly.

The Exchange's lawyers have filed a motion in U.S. District Court in Manhattan, that accuses Sirius of misusing the courts, the New York Times reported. There's no word on whether the court will accept this motion or not.

Internet Radio is now Mainstream

In what could be good news for both Pandora and Sirius XM, marketing experts have concluded that streaming internet radio is now mainstream. An advertising group called TargetSpot surveyed internet radio users and came up with some surprising results, the New York Times noted.

Around 64% of internet radio users own their homes, and nearly half of them are married, the survey found. That indicates that internet radio serves the kind of middle class audience that advertisers want to cater to.

The same survey found that 80% of internet radio users listen to it for one to three hours a day. That should be very good news for Pandora stock holders and bad news for traditional terrestrial radio.

The only bright spot in the survey for traditional over -the -air radio was morning drive time (6am to 10am) when regular radio is the most popular. The reason for that is obvious - most people are listening to radio in their cars at that time. That would also be very good news for Sirius, which is installed in a high percentage of vehicles sold in the U.S.

Expect news like this to send radio stocks, such as CBS, Clear Channel, and Cumulus Media (NASDAQ:CMLS), lower. They have already been sent reeling by reports that Pandora is the most popular radio station in L.A. Now there seems to be evidence that it can steal the most valuable advertising customers from other media.

The big challenge here will be converting those numbers into actual advertising revenue that will actually show up on quarterly reports. Unless companies like Sirius and Pandora can demonstrate that digital radio listeners can actually boost earnings per share, they are going see their stock prices stay low.

Pandora Claims to Have 150 Million Registered Users

Even though it is not actually making any money yet, Pandora is still growing fast. The company's CEO Joe Kennedy told an audience at a convention in New Orleans, that his service now has 150 million registered users in the U.S. If true, that means that nearly half the population of the U.S. is a registered Pandora user.

I'm sorry, but I'm just a little skeptical of those numbers. You can't tell me that half of Americans are now listening to Pandora. My guess is that those numbers include large numbers of people in other parts of the world who are accessing Pandora over the internet.

Another possibility is that large numbers of people are registered with Pandora more than once. For example, a person might be registered on both his personal computer and his computer at work. Pandora could be counting that as two separate users. If this is the case, we should definitely treat any internet radio viewing figures with a great deal of skepticism - there's no way to verify them.

Questionable figures like that might give Pandora's stock a momentary boost, but they could undermine it in the long run. If these numbers are found to be inflated or some sort of hoax, Pandora's stock values would probably plummet.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.