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. (more…)
By Steve Garcia
By Relmor Demitrius
