On August 13, 2012, we issued $400 million aggregate principal amount of 5.25% Senior Notes due 2022 (the "Notes"). The Notes were sold to J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and UBS Securities LLC as initial purchasers. The Notes were offered to certain non-U.S. persons pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and to qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount. The terms of the Notes are governed by an Indenture, dated as of August 13, 2012, among us, the guarantors named therein and U.S. Bank National Association, as trustee (the "Indenture").
Last Wednesday, after already announcing the company would be paying down a significant amount of debt, Sirius announced that it intended to offer these $400 million of Senior Notes due 2022 (listed above) to institutional buyers. Now we know who these institutional buyers are. What we don't know is what the money will be used for. However Seeking Alpha writer Crunching Numbers has one idea:
With FCF building at Sirius XM, and with enough cash on hand and cash coming into the company to meet the 9.75% and 13% debt, investors should be asking: "Why is the company going to the credit markets at this time?" Is it just possible that Sirius XM is close to initiating a share buyback that would put Liberty in control?
Stranger things have happened.
This is a definite possibility, and it could explain one more reason why the stock seems solid at $2.50. CEO Mel Karmazin has been saying that he wanted a buyback which would give money back to the shareholders, but those plans were put on hold when he announced he did not want to help Liberty Media (LMCA) take control of Sirius with a share buyback. Could this be a bargaining chip in the ongoing FCC saga?
Another interesting SEC filing shows that Sirius XM Chief Financial Officer David Frear sold 3,379,900 shares of Sirius on August 9 which averaged $2.44 each. And we must also watch the SEC filings for Mel selling his "Charitable Shares". There has been a pattern to his sales, in that they always seem to be traded around the middle of the month. As you can see from the chart, his sales in May and June were one of the catalysts for the steep decline in price. However in July, he only sold a few million shares which had little, if no affect on the stock price. Since the stock is not only holding, but rising to new highs each day, I have to assume that there is little or no affect from his sales this month. This may disappoint a lot of shorts who have been waiting for the anticipated dip. But with this huge volume, Karmazin's sales will just be gobbled up.
So why is the price continuing to plunge ahead? Could it be that there is a buyback in the works? Right now that is total speculation, and this may just be the Super Short Squeeze that was anticipated. If this is being caused by shorts covering, the price should come down next week when it is over. That might offer a great buying opportunity for a piece of this cash cow.
Disclosure: I am long SIRI.