Sirius XM (NASDAQ:SIRI): Never Mind The Mainstream

Over a year ago Sirius XM board member and Liberty CEO Greg Maffei was quoted as saying “Our Sirius investment has performed very well” and “We consider Sirius XM to be the anchor of our LCAPA stock portfolio.”  Since that time much has changed with regard to Sirius XM.  It has become an even stronger company by better managing its debt and growing its subscriber base. It is also interesting to note that none other than Jim Cramer did a piece back in late 2009 in which he discussed Sirius XM in the following way.  “If you like Sirius, do not play the common stock. The bonds are the best bet. Not that long ago, in the summer, Barclays put out a terrific piece about the 3.25% Sirius converts due 2011. These converts, which currently sell at 88, could be a great play on any turn, because they will get paid off at a nice gain. Barclays likes it because there is no other Sirius debt due ahead of it, and if it gets in trouble, Liberty Media, the new investor that injected capital, will make that debt good, because bankruptcy wrecks the principal asset that SIRI brings to the table: its gigantic operating loss. I am also drawn to the 9.625% notes that mature in 2013, a piece of paper that has zoomed in value since the decent quarter Sirius posted, and which trades more actively than all other bonds….

Now I am no fan of Jim Cramer, but I have to give credit where credit is due.  Even though he was wrong on the correct play, owning the stock from the same time frame would have netted you more total income, from a pure bond perspective he looked like Nostradamus on those two bond calls.  Both series of debt were addressed by the company with the most recent being the 3.25% convertibles, which are subject to an offer at a premium for early redemption this month.  What also has been happening lately is an incredibly blatant attempt to create falsely negative sentiment with regard to Sirius XM.  Let me start to address this negative smear campaign with the debt issue.  Debt is being reduced as we speak and will be in the next quarters filing, but I assure you that total long term debt, excluding related party is actually about 125 million less than showing, 2.57 billion this quarter already with the 3.25% redemption once it is complete vs. 2.695 billion reported in the 10K for fiscal 2010.  Add to the situation just released news in the proxy which shows a reverse split is off the table, and the poison pill is going to be left to expire as well.

Next, there is the ever popular story of cheaper internet radio services that are going to spell doom for Sirius XM.  Services like Pandora or Slacker are all cheaper than Sirius XM, yes that is true on one hand, but when you add the cost of streaming data charges, even if you have the rare unlimited data charge, the cost goes up on those services to the point where I would suggest you are getting less and paying more. Also, although I personally enjoy the variety of content on Sirius XM, I am sure there are plenty of folks out there who are happy just listening to their personal radio playlists and are willing to tolerate commercials.  There is always something for everyone to like or dislike. As the saying goes, one man’s trash is another man’s treasure.  Recent events have also taught us that Sirius XM does indeed intend to add value to the internet based service for all subscribers, and to differentiate it in some ways from the satellite platform. Adding the recent Limited engagements 2 channel to the internet version of the service shows intent to do just that.

Of course the biggest reasons to own SIRIUS XM common shares are the improving metrics and business model. The undeniable synergies created when the two companies merged, the free cash flow and EBITDA growth, as well as subscriber growth and additional revenue streams, which all bode well for the company’s dynamic turnaround and the future improvements in operations and infrastructure costs.

This smear campaign is about getting you and me, the common stock holders of SIRIUS XM to sell our shares on fear of bad news and get out leaving any future gains and cheap entry in the rear view mirror so that miscreants who write these negative articles and trade on fear have easier pickings as well as hedge funds, institutions, and wealthy investors that have missed the boat to this point. The choice belongs to you the retail investor. The SEC filings and recent events are all available for review right up to the Q4 2010 filing. All company filings can be viewed here (http://investor.siriusxm.com/reports.cfm). I would suggest that anyone who has an interest, take the time to review and read those filings. Specifically read the filings since the merger in 2008.  Once you do, you will most likely be glad to have read this article. The improvements are real tangible improvements, not hearsay from some bloggers on the internet. It also makes me wonder why people who dislike the service spend so much time harping the negative angle. Surely many folks out there can put two and two together.  I write these articles to help people get to the truth buried at the bottom of the pile of garbage that is disseminated in the mainstream media and on some blogs. Best of luck to all and do your own due diligence.

Disclosure: Long Siri