By Relmor Demitrius
Sirius XM Radio (NASDAQ:SIRI) has had one hell of a year so far. The sentiment on this stock from only December of 2009 to April of 2010 has changed dramatically. On the last trading day of 2009, Sirius XM traded for 60 cents a share. As of yesterday, the equity had doubled, hitting $1.20 a share. That’s a 100 percent gain in a year that has seen the DOW gain 5%. Impressive you say? Speculation stock which payed off? I take offense to that. Absolutely no way is this in any way a speculation gain. This was a pure evaluation play, in my opinion, and I have been stating this for months now. How can a 2.7 billion dollar revenue generator, cash flow positive, 18 million subscriber service and growing company, be priced under $1? Easy. The media created so much misinformation and lies about this stock and took such an emotional hatred for this company and equity, it defied logic and reason. The short play in 2009 on Sirius XM was based on pure speculation. The recovery was only the realization of facts setting in, along with expected production from the company in regards to handling their debt load and cutting costs, without sacrificing quality of the product. They actually cut costs and increased the value of the product in 2009 while opening the service up to many new outlets, and adding great content like MSNBC to their already packed lineup of sports, talk, music, specialty shows and channels.
Speculators in 2009 bet big on Sirius XM failing. Of course it was the contrarian opinion, going against all odds and common sense. The short attack was so against rational thought, one almost suspected the short interest itself along with; coincidentally a vibrant and emotional media attack against the company was to blame. As an investor that watches for signs like this, I immediately started feeling more and more confident that the company would succeed. Anytime the mass main stream media is emotionally attacking your company, there is probably a very good chance they are wrong or have a motive. Journalists, analysts, and media pundits from across the media spectrum bashed this company, bet against it, and took a bearish view. As a media contrarian, I knew this was a very good sign. So what did the speculators that were shorting this stock go on? Nothing. They went against facts. And they got burned for it too. If they had started the short before the merger, then that might say something. However, most of that short interest was attached to the lent shares on the merger debt, hence not a short bet at all. I’m talking about the retail short position, and the institutional short position not attached to hedging a bond trade. Sirius XM started 2009 around 12 cents and ended the year trading at 60 cents a share. As short interest has once again been increasing in 2010, speculators are out again betting against Sirius XM going forward at every turn. I will now present the facts that are surrounding Sirius XM that has caused more than a doubling in its open short interest since January of this year. Remember, the shorts closed their positions down to around 55 million from over 230 million shares to begin 2009. The 55 million share amount will probably be the lowest it will reach until hedged bonds are paid off. For a float over 3.8 billion shares, this percentage of short interest is actually still rather small. You will soon see why I am worried for these speculators. I often warn that investing on speculation can bite you.
In January of 2010, Sirius XM issued a press release announcing subscriber growth higher than expected. In this release they also mentioned a few other metrics that were positive to the company.
This news quickly followed with the announcement that Sirius XM was once again broadening their availability, this time reaching out to Blackberry mobile phone users with an application that allows streaming of the service directly to their phone. Having already initiated an Iphone/Ipod app earlier in 2009, the clear intent to reach all smart phones is now more than apparent.
Next they were able to refinance 500 million dollars in debt due in 2013, pushing it back to being due after 2015. This opened the door for Moody’s to upgrade some of Sirius XM’s existing debt. S&P also affirms their credit outlook as “Positive”, meaning a debt upgrade could be coming shortly.
Sirius XM recently used cash on hand to remove outstanding debt due in 2011, the 10% “PIK” notes for around 113 million dollars. This is some of their more near term major debt due, clearly indicating responsible debt management is evident with this transaction, as well as being able to meet debt requirements as well as pay some debt off one year early.
Sirius XM floated a press release for Q1 stating once again the company added subscribers and was on a projected pace for stated growth goals in EBITDA and revenue. They projected 20% growth in EBITDA, and high single digit growth in revenue for 2010, from 2009.
Sirius XM continues to add great content, adding MSNBC earlier this year to their already jam packed line up.
Sirius XM was added to the NAS-50, a tracking fund on the next top 50 companies on the NASDAQ exchange that would be most likely to be added to the prestigious NASDAQ-100.
Sirius XM has regained NASDAQ bid price rule compliance, now having traded for 10 straight days over $1. This removes any delisting hopes speculators had on shorting this stock and a huge blow for this group here.
Sirius XM has stated a reverse split is now being removed by the board, due to meeting compliance with NASDAQ and trading now over $1. This is also another huge blow to speculators, as it shows the company cares about its stockholders, and would rather grow back up from the bottom, than use a very risky financial trick instead. The company’s stance has been consistent on this issue from day one. No reverse split unless needed for delisting. So any speculators out there shorting on a reverse split in the future, are probably once again playing the speculation card on this one. It’s simply never going to happen. King of all Trades has been giving its opinion from day one that the reverse split wasn’t going to happen. This position has proved now to be true.
Russell index will be adding Sirius XM back into its fold the last trading day in May, as long as Sirius XM remains over $1. Shorting against this major planned purchase, which is 100 percent going to happen as long as Sirius XM is over $1 on the last trading day in May, the Russell’s formula for stock inclusion leaves zero room for a subjective decision and so long as Sirius XM meets the criteria, its in, period. You can speculate that Sirius XM won’t be over $1 by then, but you can’t speculate that it won’t be added if it is. The bet against this one would definitely be some major speculation.
Looking back over their year it is puzzling what shorts are using as news to increase their position from January of 2010 till now. As speculation runs rampant again on Sirius XM, smart investors and educated longs will once again be proven validated, and this saying will be true again. You speculate in Sirius XM, you get burned.
Liberty Media, which own 40% of Sirius XM and holds it in their tracking stock, Liberty Captial (NASDAQ:LCAPA), reports their earnings on May 6th.
Sirius XM will have their conference call on May4th, before market opens.
For complete up to date financial news, technical analysis, and forum discussions on all investment types and trades, please visit www.kingofalltrades.com.
Disclosure: Long SIRI
Awesome article.
Great article rel. The shorts need to come to their senses!
Wasn’t SIRI added to the NASDAQ Q50?
Taken from NASDAQ site : “NASDAQ Q-50 Index(sm), an innovative tool to track the securities that are next eligible for inclusion in the world-renowned NASDAQ-100 Index”
This means Russell listing AND possibly NASDAQ 100 listing doesn’t it?
Telling it like it is with no holds barred…that’s what I like about you Rel! Excellent read!!
Rel,
So far your and your colleagues’ articiles about siri have been absolutely outstanding from any aspect you look at. Most importantly, you use real facts and build reasonable arguments. It is so much fun to read your logical and enlightening pieces. I am always looking forward to your great inputs. I hope the community shares my opinion.
Relmor, very good article, however this is my points for you to consider:
1. The naked short selling is widespread in SiRi and the SEC regulations are poorly enforced.
2. Ability to spread lie on the company without any price to pay is widespread. (Cramer).
Lehman Brothers is a classical case, internet is full of nonsense, and the truth is eroded.
3. Foreign Government become more socialist (China, Russia, Europe & South America), centralizing power in media. The fear of democracy and freedom from US, forcing them to do
everything possible to undermine US World Radio (Sirius XM). They will put money in place
to short the stock. (Hedge Funds)
The solution is simple , you need heavy US institutional investments, good regulation and to prevent any shenanigan government may need intervention. Good extended credit for Siri is a must and should be given. This is one of most important company in the USA media and the only company who can change and spread the word of freedom, liberty and truth in balance way around the world.
Without Sirius XM radio success, there will be no free enterprise, no capitalism and no US story to tell, which is paramount in this world. The best information source.
The best American technology, content, and the best Media company at the price of coffee a day.
Zora1
Zora, Very interesting third point…haven’t seen that before…makes sense…
Zora1, Number 3 is a rather heavy comment. However, when you think about it sat rad could be the next big global technology. I feel as an investor if you listen and trust in Mel K. you can’t go wrong. Everything he promised is coming to pass. I have no doubt he will lead SiriusXM and investors to pay dirt. Just sit back, relax and watch it run. Patience is the key to success for long investors.
Great stuff Relmor!
I sure hope all those “spectulative shorts” get their ASSES handed to them come Tuesday, if not sooner, a massive squeexe would be awesome.
Thanks for your efforts!
Actually, Rel, Siri will qualify for the index on the last trading day in May if the price closes over a dollar. The rebalancing takes place on June 25 although many will buy well in advance to that date expecting a run up.
http://www.russell.com/indexes/membership/reconstitution/default.asp
Thank you for the details on that Boomer. Much appreciated.
Relmor, this may not hold water, but let me ask this question anyway (it may be all wet). Is there not a point where shorts have been building their stock shares of Siri w/ their gains and now that they can’t make money on the stock going down will reverse engines and start fanning the flames to make money on the way up?
Depends if the same people who shorted want to go long. At some point shorting a strong sucessful growing company isnt going to be done consistantly. When that exactly is, Im not sure. But almost all stocks will be shorted at tops significantly, especially ones with a lot of press and volume behind them. There will always be someone betting against Sirius XM, what Im hoping is those betting against Sirius XM are less and less wealthy people doing it over time, and doing it makes these people even poorer.
Excellent article Relmor. Your unique insight and factual writing are a pleasure to read. Long live SIRI.