Why the Wild Trading in XM and Sirius

There’s some wild trading going on today in shares of XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI).

My suspicion is that most of the gyrations are connected with a Wall Street Journal story today which says FCC Commissioner Michael Copps has voted against approving the pending merger of the two companies. The story notes that two other commissioners, Robert McDowell and FCC Chairman Kevin Martin, have voted to approve the deal. But none of that is really new; the position of all three men has been well known for some time. The real questions involve the other two commissioners: Deborah Taylor Tate, a Republican, and Jonathan Adelstein, a Democrat.

Last week, Adelstein laid out the conditions under which he would vote in favor of the deal. (He would add more severe strictures than those which Chairman Martin has proposed.) The WSJ story says there has been little discussion about Adelstein’s proposal, however.

Meanwhile, XM this morning posted Q2 revenue of $318 million, a bit shy of the Street consensus of $323.2 million. The company lost 38 cents a share in the quarter, a bit less than the Street’s forecast of 41 cents. XM noted that subscriber acquisition costs in the quarter fell to $65, from $75 a year ago. Cost per gross addition fell to $100, from $121 a year ago.

SIRI and XMSR both were down sharply earlier in the session, but have since recovered most of what they gave up. Sirius is down 12 cents, or 5%, to $2.30; XM is down 46 cents, or 5.1%, to $8.61.

Comments

[cos1000]

Eric, If you go back and look at the first post that came out on MarketWatch @ 1:45 PM they said, "FCC Commissioner votes against SIRI - XM Deal" without any further discussion or explanation. That was when the precipitous drop in both stocks prices took place and then 10 minutes later articles came out explaining that it was Copps on Monday that voted no. It was an irresponsible release of incomplete information that caused the panic by MarketWatch.com and any of the other wires that carried the incomplete news release. By the time anyone could figure out what it was out a large number of tight sell stop limits were activated and we were off to the down side. Without any further news the stocks came back nicely awaiting Tate and real news.

[Freep]

You're absolutely correct cos100. I was able to pick up another 500 shares of XMSR on the dip. Onward and upward.

[oregonduck]

Filings at the FCC today show a lot of meetingw with Tate friday and Monday. Mel met with Tate personally on the 18th. I think that the deal is going to be announced Wednesday. If Mel says no deal, I had better be by a computer, becuase all of my limit sells are on the top side, I dont have stop limits in place.

[cos1000]

Freep, Congratulations on your quick thinking, right place at the right time. Some times it's just that way. What a great example of a couple of stocks moved by news, even when meaningless, rather than fundamentals. I hope the "PoP" up is as impressive but longer lived.