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Tyler Savery
42 Comments
Analysts on Sirius: Merrill, Goldman See Gloom, Barclays Sees Upside
There were three reports issued. Sometimes it is not possible to "balance" two bad with two good. It simply was a fact of timing.
Your opinion that putting the two negatives first could be countered by someone saying that the positive report first is getting buried by two negative reports.
The headline was simply a synopsis of what the reports were.
Today, CITI issued a report. There have not been others as yet. The headline is positive, and the analyst report is positive. Certainly that will have some people saying that I am "pumping" the stock when in fact I am simply reporting the release of another report. As yet, S.A. has not picked that article up, but it is on my site. If this afternoon a negative report comes out, I will report on that as well.
Thank you for your readership, and I hope you can understand why the articles are the way they are.
Analysts on Sirius: Merrill, Goldman See Gloom, Barclays Sees Upside
1. The article simply represents that some analysts have come out with opinions. When this happens, I cover it.
2. I try to outline the basics of what an analyst is saying without interjection of my own opinion. If I have a strong opinion about a report, I sometimes dig deeper into it in a separate article. I feel this allows readers to see an analysts opinion without my own opinion clouding the issue.
3. I feel it is important to see this, or any investment, from many perspectives without the rose colored, or gloomy gray glasses on.
Simply stated, articles such as this are merely to inform readers what opinions are out there. The fact that one analyst has more or less credibility than another is a matter of opinion. Even if i disagree with an analyst, or Jim Cramer for that matter, I still want to know what they are saying.
Cheers
Will Tate Approve Radio Merger with $20 Million Fine?
Arbitrage Spread Between Sirius and XM “Abnormally High” - Stifel
LOL....After iI state that I will stop posting here in the comments section you go and ask a question. Are you tryiong to kill me? Just kidding.
Tonight is at 9:00 PM
That's it, no more comments posts for me.....LOL
Arbitrage Spread Between Sirius and XM “Abnormally High” - Stifel
Point taken. My posting and responding in the comments section here seems to take away from a healthy discussion of opinion, as it appears some people simply want to discuss subject matter that veers outside what the topic of discussion should be.
Thanks All
Arbitrage Spread Between Sirius and XM “Abnormally High” - Stifel
I am not being argumentative, but there is something there are a few things that need to be pointed out:
You stated, "The example of the “arb play” that you list is NOT often used. How you can make such generalizations confirms you think you know more than you do. There is no typical arb play. Each one depends on the given conditions and probabilities of the various events. Anyone who says there is a typical arb play isn’t an arb trader. Between the two of us, I’d say I know much more about arbitrage than you. Where did you get your knowledge of arb strategies?? From online posts?"
In response, this "arb play" is directly similar to that used by holders of converts. They short the stock against the converts thereby locking in a virtually guaranteed return. This is exactly what Honda did with XM stock.
You stated, "Once again, it’s very difficult for individual investors to find firms that will let you short $2 stocks. I would doubt you can get them from online brokers like E-Trade and Schwab. And if you can they sure won’t have much to hand out. Usually only the Wall Street brokers have them but you’ll find it very difficult to do even an unsolicited trade due to compliance. These are facts. Accept them."
In response, there is a documented large short position in SIRI. The REGSHO listing bears this out. Whether an individual trader is able to short is not really material. Shares are being shorted. Who is shorting them does not really matter.
You stated, "So based on your extremely risky arb example, I guess you realize you are providing justification for shorting SIRI. I wonder how all of your SIRI cheerleaders will like that."
In response, I do not have "SIRI cheerleaders", nor do I really care what they say about such a trade, nor of my own opinion. I have had many criticize my belief that the short term situation in SDARS is very challenging even with a merger approval.
You stated, "You assume that a short SIRI position will hedge a drop of both stocks. I will guarantee you that it will not. Both stocks will not drop the same amount. I will guarantee you that the strategy you list will end up losing money if both stocks go down."
In response lets run through each situation with taking that trade with SIRI at $2.00 and XM at $7.79. The arb in this situation is about 19%:
SIRI DOWN and XM DOWN
- Starting position is $0
- short 500 SIRI @ $2.00. You now have $1,000
- Buy 129 of XM @7.79. You now have $0
- SIRI drops to $1.50 and XM drops to $7.00
- deal closes. You now have 594 shares of SIRI (XM shares converted)
- Buy 500 shares of SIRI to close short position @ $1.50. You are now down $750
- Sell 594 shares of SIRI at $1.50. You gain $891. Profit is $141 or 19%
SIRI UP XM DOWN
- If SIRI went to $2.50 and XM went down to $7 you would cover the short for $1,250, and sell the shares for $1,485. Again, a 19% gain
SIRI DOWN XM UP
- If SIRI went to $1.50 and XM went to $9, you would cover your short for $750 and your sale would net $891. Again, a 19% gain.
SIRI UP XM UP
- If SIRI went to $2.50 and XM to $9.00, you would cover your short for $1,250 and sell shares for $1,485. Again a 19% gain.
That is like thinking you will be completely protected from all downside if you buy puts. These strategies only provide partial protection. As a matter of fact, XM could drop and SIRI could rise to narrow the spread. Get your head on straight.
Could you please outline your statement that you will lose money if both go down? The risk in such a trade is not the price, but whether or not the merger gets approval, as well as the time involved for the play to happen.
You stated, "The arb example you list is extremely risky because you are doubling down in terms of the amount of leverage you are using. How you can even use this example and apply it to SIRI/XM for the people that read these posts is highly irresponsible."
In response, I simply gave an example. I did not recommend the strategy, nor have I employed it myself. Such a strategy minimizes the use of your own capital, virtually locks in the spread, but relies on the companies being in business, and the merger gaining approval in a timely manner.
You stated, "Even a simple short is very risky. Unless you are a professional trader you should not be shorting..ever. It is obvious to me you have no real experience in arbitrage."
Shorting is risky. I rarely short an equity. It simply is not my style. Any investment is risky. As to experience in arbitrage, I outlined one type of trade, and gave the commonly used example of a strategy with converts. I will leave that part of the conversation alone due to what was outlined above.
You stated, "Don’t try to turn this around and make this an issue of whether the merger will pass. That is not the issue. I find your reliance on the merger as some sort of savior to be a bit funny. Even if the merger passes, these companies are going nowhere."
In response, These stocks are all about the merger right now. You were the one that stated that the arb players were betting that the merger would not pass. I disagree with your assertions, and stated that time will bear it out. Right now we simply have opinions. You feel that the companies are going nowhere. That could well be the case, but again, it is an opinion. The reasoning's behind opinions would make a good discussion.
If you want productive discussions, that is wonderful. People should see as many perspectives as possible. That is a healthy and valuable discussion. Name calling accomplishes very little, and diminishes from the value of a conversation.
Thanks for your opinion and the discussion
Arbitrage Spread Between Sirius and XM “Abnormally High” - Stifel
Part of the arb play, and a popular trade is to go long XM and short SIRI:
1. Assume you short $1,000 worth of SIRI (500 shares, SIRI @ $2.00).
2. You take the $1,000 from the short sale and buy long on XM (129 shares) (XM @ $7.79).
3. Upon merger closure, your 129 shares will become 594 shares of XM.
4. You owe 500 shares of SIRI on your short, which you can pay off. This leaves you with 94 shares relatively free and clear..
5. If as you say the stocks both go down, you will still have locked in 94 shares on the arb play. Your investment capital into XM came from your short sale on SIRI. Regardless of moves in the stocks, you walk away with shares with virtually no capital outlay.
This example is oversimplified but details an arb play that is often used in stock transaction mergers. I am not recommending it, but clearly people are well aware of this type of trade.
Much of what I present isthe view of sector analysts without my opinion interjected. If I do interject my opinion is is quite clear.
I have no "need" to be positive for the money. I have stated many times that I sold most of my SDARS stock prior to writing about the sector. Do I still hold stock? Yes. Will it change my lifestyle if it goes up or down? No. I am much more invested in other areas. Do I want the merger to go through? Yes.
If you think I only present the positive then you have not been following what I have been writing. I covered the slumping OEM channel, the Goldman downgrades, and other reports that have been sour on satellite. I have written that I feel that people expecting a short squeeze may well be disappointed.
An investment in SDARS has risk. People who typically invest in it understand this.
Lastly, most analysts, as well as sector followers in in the camp that the merger will indeed pass. There were some who felt that the merger would never pass DOJ muster. They were quite wrong. Now, even most of those naysayers have a belief that ultimately the merger will pass. If you want to say that I am "missing" by feeling that the merger will pass, that is fine. Time will bear out whether or not I missed.
Arbitrage Spread Between Sirius and XM “Abnormally High” - Stifel
The opinion on the arbitrage spreads was the analysts, not mine. My own opinion does remain that the merger will gain approval, but that is not material to the article here, as I was not writing about my own opinion on the odds of the merger happening.
Your assertions about shorting Sirius as a difficult task seem at odds with what is happening with the stock. Sirius has been on and off the REGSHO list many times in the past couple of months.
The quote about Spring's being more conservative and cautious stems from his taking down several estimates on metrics and adjusting his models to reflect a more conservative stance. I feel that this is prudent, especially with all of the uncertainties that are out there.
If someone gains 25% from the arb spread and sells on merger approval, then there is no way that they lose their profits. A 25% return is a decent return, especially considering you can accomplish it without a huge cash outlay. I am not recommending this trade, but it is something people will do.
SDARS is a speculative investment, plain and simple. I think that most will echo that sentiment.
Georgetown Partners' Latest Radio Proposal Raises Many Questions
What you are not comprehending is that the "Long SIRI, Long XM" is a statement that I have a position in the equities. It is not a recommendation. I have had a long position in these companies since the recap of SIRI.
Someone who bought at $1.00 and someone who bought at $3.00 can both be LONG. However, their sell points or sentiment could differ dramatically.
LONG is a statement that I have shares in the equity. Nothing more, nothing less. This has been made quite clear some time ago for any of those that did not understand the differences between a statement of position and a recommendation.
A recommendation would be BUY, SELL, HOLD, etc.
The name calling accomplishes very little and does not add to the value of the conversation.
Georgetown Partners' Latest Radio Proposal Raises Many Questions
You are so bent on casting aspersions that you have opened yourself up to the following criticism:
I have stated time and time again that I am not a "self appointed satellite radio expert" yet for some reason you love to give me that title. I have made it crystal clear, and stated it explicitly, I AM NOT THE EXPERT ON SATELLITE RADIO, yet somehow you still do not comprehend this. Perhaps reading comprehension is the source of some of your problems.
You are seeing something that is not there, and even when you are told point blank that it is not there, you still see it.
I do not know how much more simple this concept can be. I do not recommend buys or sells. Nowhere in my writings will you find me making such recommendations.
GJel.....
I have actually been quite neutral on these stocks for quite some time. I am bullish on SDARS as a concept and a product, but that differs from the equities.
Interestingly, someone sent me this site ( labs.daylife.com/journ... )that seems to pick up my stories and this site categorizes me as "mostly neutral" as you can see on the right hand side. I have no idea how they come to their determination, but I thought it interesting.
Georgetown Partners' Latest Radio Proposal Raises Many Questions
I do not recommend buys or sells. Plain and simple
Why Did Satellite Stocks Head North Friday?
clearly some things simply get lost on you, or you simply choose not to see them. Whichever is the case, it matters little.
1. I have stated time and time again that S.A. does not pick up all articles I write. I have offered my opinions on many things that revolve around this sector.
2. I have spoken many times about services that are competition to satellite. I have stated quite readily that the Slacker Internet Radio service is something that satellite should consider trying to replicate for their music channels. In fact, I am a frequent Slacker user.
3. I have stated time and time again that I am not portraying myself as "the satellite radio expert". I have stated that I am a person who follows things closely and has an opinion. In post after post it is YOU that is calling me a "satellite radio expert, guru, etc." I do not know how much more clearly I can state this. Perhaps CAPS WILL HELP. I AM NOT A SATELLITE RADIO EXPERT. I AM SOMEONE WHO FOLLOWS THE SECTOR AND HAS OPINIONS.
4. SDARS has never made a profit. Most are already aware of this. To say that it is pure financials that drive the stock is a fools chase. People invest in SDARS because of potential. Right now the first item that deals with the potential is the merger. Most already know this.
Media will see large changes in the coming years. No one denies this. Satellite is simply one method of delivering content. Do you think all of this content will arrive for free? No, it will not. There is a lot of potential, and if one were to assume that, with Karmazin at the helm, the merger is the last stop they would be kidding themselves.
Why pay $13 per month when you can get something free you ask......
A poor question to say the least.
Why pay for a cell phone when you have a home phone. Why pay for cable tv? why pay for gas when you have a bike? Why pay for a restaurant steak when you can cook one at home? Why eat at del friscos when you can eat at wendy's?
The answer is that people either like the convenience or the product. If the subscriptions or revenues fall, then SDARS must either make changes or fail. Adjusting to the landscape is something that all companies must do.
Cramer Doesn't Say What Radio Stockholders Want to Hear
I did respond to you, but perhaps you missed it. For the benefit of readers I will repost it here.
Jun 26 07:39 AM
Thanks for the comment. The answer to some of your questions have been written about or discussed in the past, but here is a very brief synopsis:
1. While I do post information about what analysts are saying, I am not parroting them in my own opinion. There are many analysts that I disagree with in several ways, inclusive of Goldman and CITI (the most bearish and most bullish).
2. I have never appointed myself as a "satellite expert"
3. I have stated many times that the upside is a long process, that there would be heavy selling on the way up, and that it would take a "perfect storm" to get to pre-merger levels. That task is even more difficult now. I do not give "buy prices" or "sell prices".
4. This article was not about the accuracy of Goldman, but rather the attention he has received from the street, and will receive again with his next report. Some of the items i disagree with Goldaman about I have expressed in the past.
5. $1.50 is a possible bottom, but it is also possible that the bottom has already happened. A lot depends on the FCC news, as well as what Wienkes does with his next report. He does have the ear of people, so even if someone disagrees with his thoughts, they should listen to what he says, and when he says it.
6. The top. As I have stated in the past, this equity will have challenges getting through the $3's even with everything going swimmingly. Longer term, we will need to see the terms of the merger, how fast synergies can be realized, a few quarters of joint performance, and get guidance.
Cramer Doesn't Say What Radio Stockholders Want to Hear
The above article was written by my partner, Charles, at Sirius Buzz, and not myself. I am sending an e-mail to S.A. alerting them to the situation, as the article is attributed to me even though I did not author it.
Tyler Savery
Where’s the Bottom for Satellite Radio Stocks?
Thanks for the comment. The answer to some of your questions have been written about or discyssed in the past, but here is a very brief synopsis:
1. While I do post information about what analysts are saying, I am not parroting them in my own opnion. There are many anaylysts that I disagree with in several ways, inclusive of Goldman and CITI (the most bearish and most bullish).
2. I have never appointed myself as a "satellite expert"
3. I have stated many times that the upside is a long, that there would be heavy selling on the way up, and that it would take a "perfect storm" to get to pre-merger levels. That taskis even more difficult now. I do not give "buy prices" or "sell prices".
4. This article was not about the accuracy of Goldman, but rather the attention he has received from the street, and will recieve again with his next report. Some of the items i disagree with Goldaman about I have expressed in the past.
5. $1.50 is a possible bottom, but it is also possible that the bottom has already happened. A lot depends on the FCC news, as well as what Wienkes does with his next report. He does have the ear of people, so even if someone disagrees with his thoughts, they should listen to what he says, and when he says it.
6. The top. As I have stated in the past, this equity will have challenges getting through the $3's even with everything going swimingly. Longer term, we will need to see the terms of the merger, how fast synergies acan be realized, a few quarters of joint performace, and get guidance.