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Is Sirius XM Headed the Way of Old Radio?

Right on...

Ok. So now we see SIRI is DOWN .03 (from yesterday's close) @ .82 in the after hours (bid/ask .82/.83). If anyone saw what happened today @ 3:58-9P (one minute before the close, jacking from .76 to .88 in one tick) you just saw how fast SIRI will take off WHEN (not if) the new financing gets done (and which will now happen even sooner than Mel might have even thought due to the swing below $1). This is not '02, where they had the luxury of taking their time. They now have people to answer to big time--among others, can you say Howard Stern and his 34M shares he got as part of his $500M deal? He and his agent have lost a ton of cash and are not happy. Howard's not quite everything the company is, but he put them on the map and keeps them there. But today's EOD action shows how fast the MM's will raise their bids on positive news. Believe it, they are scared shitless to be down at this level, knowing how wound up things are to the downside--yet they will keep pounding it lower...unti they have a reason not to. Today may well have just been the bottom but maybe not since they closed up. I think short of the "the big news" they might still be able to close in the .70's (dipping again into the .60's intraday)--but we're close. My guess is that there must have been a rumor right at the end today and it was run for the hills--quickly exposing the higher priced MM's--thus the quick jump. After the rumor is exposed as untrue, it's right back down. Whenever SIRI announces the refi news-after the 4PM close or in premarket, this stock is going to scream it's going up so fast, as all the MM's scramble to get out of the way--as they keep trying to outraise the other. If you've ever watched that happen, it's a beautiful thing.

A current tchnical:

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RSI

According to the RSI which is currently at 26.09%, below the critical value of 30, SIRI is oversold. This means that there has been significant recent downward momentum that is not sustainable. Although the stock may not begin to rally, selling pressure can not continue at this level.
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A pretty good article from today. The takeaway from this NON-HOLDING gent is all of the upside. He includes the few downsides as due diligence, but his bent on the prognosis of the company is actually positive. For all the reasons he's listed, no way SIRI is going anywhere but up once the cloud is lifted. Hang in there longs...

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A Sirius Gamble (SIRI)
September 16, 2008 | By Ben McClure

While Sirius XM Radio (Nasdaq:SIRI) is worth a look, it’s not for the faint of heart. The satellite digital radio broadcaster's stock has the potential to at least double in value in the next 12 months, yet the risk of it disappearing off the radar screen altogether is equally high. Sirius XM is out-and-out gambling and is only for those with nerves of steel.

Sirius XM shareholders are probably feeling like one of the company’s satellites has crashed on their heads. Since Sirius and XM completed their merger at the end of July, the stock has plunged more than 70% and is now trading for about 70 cents. Back in December, the stock was $3.75.

You can’t blame investors for cutting and running. Sirius XM is sitting atop scary levels of debt. The merged company now has more than $3.4 billion in debt, with more than $1 billion of it coming due next year, including $300 million in convertible senior notes due as early as February. Running cash flow negative, Sirius XM won’t have enough cash to pay off the debt on its own steam. (Learn about debt ratios and how to use them to assess a company's financial health in Debt Reckoning.)

In the midst of a full-blown crisis affecting lending markets, getting some of that debt refinanced before February will be no easy feat for Triple C-rated Sirius XM. Without a debt repayment or a refinancing, Sirius XM shareholders could see the value of their shares descend deeper, possibly to zero. Yikes.

So, think of an investment in Sirius XM as a bet that the company can pull off a financing deal. The risk of failure is high, but there are reasons to think the company will make it through the next year.

For one, it’s hard to imagine Sirius XM’s creditors pulling the plug on the company without too much reluctance. Lenders recognize that the company, while cash-strapped, is not failing. They know that if its looming debt obligations are resolved, Sirius XM will be a self-sustaining business.

The company is increasing revenue while quickly decreasing costs. Pro-forma revenue should come in at roughly $2.4 billion this year and $2.7 billion next year. With synergies from the merger of Sirius and XM tallying up to more than $425 million per year, Sirius XM management projects EBITDA to move from a $350 million loss this year to a $300 million gain in 2009. A white knight that steps in will get a piece of a going concern with an encouraging cash flow outlook.

Sirius XM could also do a deal with an industry partner looking to take advantage of its large and growing subscriber base. The newly merged Sirius XM is expected to close out the year with 19.5 million satellite radio subscribers. Its target for next year is 21.5 million. To put that number into perspective, the company's subscriber numbers are not far behind those of cable giant Comcast (Nasdaq:CMCSA), which has 24.6 million subscribers. Potential partners that come to mind are Apple (Nasdaq:AAPL), Microsoft (Nasdaq:MSFT) and satellite TV operators such as DirecTV (NYSE:DTV) and Dish Network (Nasdaq:DISH).

At the same time, while it would be a tough sell in the current credit environment, going private may be another option for Sirius XM. The prospect of sustainable free cash flow could be a draw for adventurous private equity and leveraged buyout investors. (For more on this topic, read Private Equity A Trendsetter For Stocks.)

Sirius XM CEO Mel Karmazin certainly has the wherewithal to clinch a financing deal. Karamazin is arguably one of the top media executives of the last few decades, having sat at the top management positions at both CBS (NYSE:CBS) and Viacom (NYSE:VIA).

The upside on a successful deal may be well worth rolling the dice on Sirius XM. If Karmazin can make things happen, the share price will almost certainly head higher. According to various Wall Street analysts, Sirius XM could be worth anywhere between $2 and $5 per share.

Unless it gets its act together, Sirius XM runs the risk of going broke. Equally, a resolution of its debt obligations will restore confidence in the stock. Blue sky and speculative - that's the gamble.
By Ben McClure

Ben McClure is director of McClure & Co., an independent research consultancy. Before founding McClure & Co., Ben was a highly-rated European equities analyst at city of London-based Old Mutual Securities. He also spent several years as a business/technology journalist at the Economist Group. Mr. McClure graduated from the University of Alberta School of Business with an MBA.
At the time of writing Ben McClure did not own shares in any of the companies mentioned in this article.
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Is Sirius XM Headed the Way of Old Radio?

relmor...

Do you have LVL 2? If so, were you viewing at the close? How many MM's pulled bids at 3:58 when the price went from .77 to .88 in one up tick? I saw it in real-time but don't have L2 to see the MM's.

This my investor friends, is how the manipulation happens...hang in there longs...what you are seeing right now is a classic Wall Street play. SIRI's price today has NO BEARING WHATSOEVER on either the health or viability of the company. Don't jump!