Earlier this year, shares of Sirius XM (SIRI) had been flying high on reports that significant earnings and subscriber growth had solidified the company's path to success. On numerous occasions, the shares approached - and even surpassed - the $2.30 mark, and long-time followers of the company predicted that this was just the start of a protracted run that would see SIRI sustain the higher highs.
But what a difference just a couple of months make. Since mid-May, shares have steadily been trading for under two bucks and the flush of negative headlines about the company from various popular financial media outlets indicates that the situation may not change any time soon. Just a short time ago, the media headlines were rife with encouraging and positive news, but that is certainly not the case right now - although nothing has really changed in terms of the company and its potential.
Although competition has been stiff for satellite radio these days as a variety of alternatives continues to pop towards the mainstream, but SIRI's solid portfolio of unique and exclusive content continues to attract new subscribers and produce solid revenue growth - even as the SIRI share price continues to dive south.
As one of the most heavily-traded companies out there with a retail investor following that is second to none, SIRI is also one of the most heavily-watched companies. Given the solid following, it could be assumed that a rash of buying could take place by new or existing longs if shares dip too much further below the two-dollar mark. Many investors still consider the current prices to be a relative bargain when considering the company's growing potential and judging by some recent analyst price targets, they may be correct.
What may have some investors jittery is the uncertainty surrounding the renewed talk of a full Liberty Media (LSTZA) takeover. As it stands now, Liberty has a contract in hand to up its stake in SIRI to 45.2% with an effective purchase of over three hundred million shares for a price of $2.15/per.
This move by Liberty materialized shortly after the U.S. Federal Communications Commission dismissed Liberty Media's application to take control of Sirius' operating licenses, an action which Liberty has appealed. Through additional stock purchases, Liberty could have an even higher stake in the company by the third quarter of this year and is making a serious push to achieve majority control of over 51%. Given the relatively swift decline in the SIRI share price, speculation will run rampant that Liberty may be out to pick up some cheaper shares.
The recent Liberty Media/Sirius XM talk has few remembering that Liberty swooped in at the 11th hour and saved Sirius from the brink of bankruptcy a few years back. It looked as if the two companies would build a solid relationship based on that life line, but like Human Genome Sciences (HGSI) and GlaxoSmithKline (GSK) have also recently demonstrated, in the world of big business, marriages can quickly go sour.
SIRI will likely never trade for below a dime again, barring a huge dismantling of the company or its services, but many still consider the sub-$2 prices as a bargain themselves.
As the negative headlines continue to roll out, keep SIRI on the radar this week, as it could be 'buy time' since so many are trying to convince you to sell.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.