Sirius/XM Merger Drags On: Current Prices Driven By Media

Sirius’ (SIRI) merger with XM Satellite Radio (XMSR) is currently under review by the Department of Justice and the Federal Communications Commission. This case was brought before these two government entities over a year ago to decide the legality of the merger of the only two companies which have a license to provide satellite radio. There has been fierce protest from The National Assocation of Broadcasters [NAB] decrying this merger as a monopoly, but very little protest from the consumers or the general public. Whether or not this merger would benefit the consumer while also injecting the struggling world of satellite radio with life will only be told by time.

The chatter regarding an impending decision has intensified recently, again, and investors have ridden the up and down ride that is the satellite rollercoaster. The humble opinion of this writer is that in the case of a merger, XM may have slightly more upside, but overall, with risk management in mind (which we’ve all been studying up on) Sirius wins out. With the merger Sirius enjoys the cost cutting benefits of overlapping business and without the merger Sirius continues to ride its recent wave of momentum to become the marquee player in the industry while XM stock explores the downside. Sirius tips the scales in their favor with two heavyweights Howard Stern and Martha Stewart. These two media giants carry name recognition and brand loyalty that cannot be matched by XM provide the necessary legions to promote the necessary

Now officially the longest pending case for the FCC, one would naturally assume that a decision would be rendered any day. And with that being said, rather popular media figures have involved themselves with the merger debate while further widening the breadth of its popularity. The infamous Jim Cramer emphasized a pro merger scenario on Friday emphasizing that if the ChevronTexaco (CVX) deal and the ExxonMobil (XOM) deals passed monopolistic scrutiny then the unification of the satellite radio companies should be a no brainer. He states the most likely impediment to the deal passing is the NAB connections on Capitol Hill, which has resulted in the DOJ and the FCC dragging their feet. His conclusion is the NAB only has enough pull to cause a foot dragging event not a sufficient case to block the merger. As I write this report, assuredly for genuine reasons, a piece of investor bait dangles on the Drudge Report homepage informing us that information regarding the merger is currently developing with no link alluding to news from anyone sometime soon. I know I have been there now 20 times more than ever.

Obviously, this post lacks in fundamental and technical analysis. This was an editorial decision based upon the media stream that is now in control of the stock price of both Sirius and XM until the cloud of the merger moves in one way or another and once again these volatile downward driven stocks will be driven by fundamentals, wherever that may lead them.

Disclosure: Author holds positions in SIRI

Comments

[Kamal Raza]

I think the momentum is on and stage is set for this merger

[arb]

"Whether or not this merger would benefit the consumer while also injecting the struggling world of satellite radio with life will only be told by time."

So the merger may well NOT benefit consumers?

"Now officially the longest pending case for the FCC, one would naturally assume that a decision would be rendered any day."

Naturally. After all, one has so many precedents on which to base said assumption. Not.

"Obviously, this post lacks in fundamental and technical analysis."

Obviously.

If the merger goes through, the marketplace will react accordingly. If the merger DOESN'T go through, Mel Karmazin will, as previously announced, sue, and the marketplace will react accordingly.