I don't know which should be of less interest to SiriusXM Radio (SIRI) investors - the shares trading in a range between $1.86 and $1.88, low volume of just over 12 million shares or a press release giving subscribers a Father's Day gift - all of which occurred on Monday. The "Gift to Dad: 'Men's Health Radio,'" will provide:
a week-long series of special programming featuring the editors of Men's Health, in celebration of National Men's Health Week, offering SiriusXM listeners invaluable information and tips on everything from fitness and nutrition, relationships and sex, finance, men's fashion and more.
This must be SiriusXM's latest idea of what constitutes marketing. Just think about the number of potential subscribers that will run out and purchase a subscription so that they can listen to all five hours of programming. How is it possible that the shares didn't spike up on massive volume?
And, what about the possibility of additional advertising revenue? When I first began reading the release, all I could think of were the type of late night commercials one hears on WFAN radio. I envisioned end-to-end ads for everything from Viagra, Cialis and the Boston Medical Group for treatment of erectile dysfunction to public service announcements promoting regular prostate exams for men over 50.
How many Dads are out there that just can't wait to listen to tips on fashion? Clothing retailers must have lined up around the block to buy ad time. Will Howard Stern file another frivolous lawsuit against management because he feels as though the company is encroaching on his monopoly to talk about sex? As to the "invaluable information and tips on ... finance," how about giving investors an update on the financial maneuvering between Liberty Media (LMCA) and SiriusXM? And yes, to all those wondering, much of this is tongue in cheek.
The rest is an indictment against current management led by SiriusXM CEO Mel Karmazin. What were they thinking? Many comments on Seeking Alpha are concerned that if Liberty Media is allowed to acquire SiriusXM, it will get rid of Karmazin when his current contract is up at the end of this year. Based on this latest press release from SiriusXM, should that really be considered a negative? Can Liberty Media possibly do a worse job?
To state that the price of SiriusXM shares have been under pressure since reaching a 52-week high of $2.41 on April 2nd would be an understatement. They are down more than 20%. Bulls can look at the price, compare it to the recent purchases by Liberty Media at about $2.15 per share, and consider the price a bargain. Bears will argue that the price is reflecting the market sentiment that Liberty Media will bungle the acquisition.
Federal Communications Commission Update
According to an online article published by the Wall Street Journal on Monday, SiriusXM "urged the Federal Communications Commission ... to reject the latest application" by Liberty Media seeking de facto control. It appears as though some of the arguments used by SiriusXM are similar to those outlined in their opposition letter to the original Liberty Media application - that Liberty Media has not actually converted any of their preferred shares and that Liberty Media has not committed to taking control.
While the review process plays out before the FCC, SiriusXM shareholders can expect the shares to remain under pressure. The market tends to dislike uncertainty, and uncertainty will persist until the FCC makes its ruling.
Summary
As a long term investor, I have my own view about what constitutes fair value for the shares. It's based on the projected free cash flow per diluted share, and the current share price places SiriusXM towards the lower end of that range. That doesn't mean that the shares won't trade significantly below or above what I consider fair value in the short term.
I also have my own view about how Liberty Media will run SiriusXM, and I have to believe it will be better than the current management team, especially if an investor is to use the latest SiriusXM press release as any indication.
Disclosure: I am long SIRI.
Additional disclosure: 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 have no positions, or any plans to open positions in the next 72 hours, in Liberty Media.
