Conspiracy theorists will love this article. There are many who feel that Sirius XM Radio (SIRI) stock is heavily manipulated. In many ways, it is hard to argue against that stance. However, like many things in life, it is hard to find the smoking gun, and thus the debates begin.
Sirius XM Radio has a $100,000,000 credit facility with Loral Space (LORL). The credit was established for payments to Space Systems Loral on Sirius XM’s FM-5 and FM-6 satellites. Okay, conventional thinking states that the line of credit can not be drawn on to pay down the February debt. While this is true, there are provisions for Sirius XM to draw against payments already made. Simply stated, they could take back every nickel they have paid into the satellites and use it as working capital. Further, they could continue to draw on the facility to keep the satellite construction rolling along.
THE CATCH
Sirius XM needs to decide on whether or not to use the credit facility by December 19, 2008 (the day after the annual shareholder meeting). But Sirius XM also needs to have a market cap of at least $1,000,000,000 to borrow.
According to the Space Systems Loral 10Q for Q3 2008:
“…Under the Credit Agreement, Sirius may borrow up to an aggregate principal amount of $100 million to make milestone payments under the Satellite Purchase Agreement for the purchase of the Sirius FM-5 and FM-6 Satellites (the “Sirius Satellites”) or, on or prior to December 19, 2008, to reimburse itself for milestone payments it has previously made with its own funds. Loans made under the Sirius Credit Agreement are secured by Sirius’ right, title and interest in its rights under the Satellite Purchase Agreement, including its rights in and to the Sirius Satellites. The loans are also entitled to the benefits of a subsidiary guarantee from Satellite CD Radio, Inc. and any future material subsidiary that may be formed or acquired by Sirius, other than XM Radio and any other subsidiary designated as an “unrestricted subsidiary” under the indenture governing Sirius’s 9 5 / 8 % senior notes due 2013….”
According to Sirius XM’s 10Q:
“…The Loral Credit Agreement contains certain drawing conditions, including a requirement that SIRIUS have a market capitalization of at least $1 billion. Any loans made under the Loral Credit Agreement generally will bear interest at a variable rate equal to three-month LIBOR plus 4.75%….”
Simply stated, there is a substantial credit line available that could give Sirius XM Radio some much needed breathing room, but the clock is running short, and the market cap is too low. The market cap here at .26 cents is $855,000,000, a good $145,000,000 shy of the credit facility requirement. What does it take to get above $1,000,000,000? A stock price of .31 cents.
This is where the conspiracy theorists will go nuts. Sirius XM Radio seems stuck in its current range. Each day that passes with a market cap below $1 billion is another day where the hands of Sirius XM are tied. With the deadline only a few weeks away, and the stock price not cooperating, it is little wonder that the Board and Management are looking at several viable options. Those that feel the company is not thinking things through can rest assured that management is well aware of the situation. What we have is hesitant banks, and a deadline of December 18th on a credit facility. Someone has to blink first. Loral’s own $100,000,000 credit facility is through JP Morgan (JPM), so it is possible that somehow an arrangement between Sirius XM, Loral, and JP Morgan could be arranged, but time is getting critical.
Because of the credit facility, it is my opinion that Sirius XM will want to be able to announce some sort of refinancing prior to December 19th, in hopes that the market cap will appreciate by then, allowing the company some flexibility in their cash situation.
Is someone deliberately holding Sirius XM stock below .31 cents? The conspiracy theorists will say so, and while there is no smoking gun, it is hard to argue against their stance. The bigger question is whether Mel can exert his influence to get the financing done and see an appreciation in the stock price that will allow more room to maneuver.
All that being said, there is still no guarantee that Sirius XM has any intention of using the facility, but the leverage comes from being able to use it, not necessarily from actually doing so.
Position: Long SIRI.
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This article has 82 comments:
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ZenInvestor
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71 Comments
My Website
Nov 16 08:02 AMStill think that is SIRI can get past the debt issue a bit they will move upward, so we all have our fingers crossed.
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Indian Joe
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9 Comments
Nov 16 08:29 AM-
Scot's Slant
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43 Comments
Nov 16 10:11 AMAlso, when people ask: "why has Sirius not done more advertising with the holiday shopping season approaching," management has probably thought this through as well: With all indicators pointing to dismal consumer spending during this 4th quarter shopping season, management has probably decided to sit tight on their advertising budget until after the new year and do more to keep their existing subscriber base intact -- Karmazin and his team are not a bunch of nitwits who are asleep at the wheel....
And by the way, there is one more thing: As the directors of Sirius recommended, I voted "for" on the reverse stock split. I don't care what the analysts say -- if they are so smart then I must ask, "why are they languishing behind a desk with a meager salary of $125,000 while Mel earns a few million or more per year in running a company that is worth billions of dollars"? The man's track record speaks for itself: He is not intentionally driving this company towards bankruptcy and it is sheer stupidity to believe otherwise....
Scot's Slant
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bamanomical
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4 Comments
Nov 16 10:45 AM-
truck_driver_Tom1
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15 Comments
Nov 16 10:55 AM-
sl62
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827 Comments
Nov 16 11:00 AMNice work on your articles latey (see? good reporting always gets kudos!). This is an interesting scenario and it is entirely possible there is a "battle of the wills" playing out with the stock...but IMHO, I don't think so in the way some might think. The current market environment is tough enough where in tech and media, if you are not flat, you are down. SIRI is in a great spot for now just being flat while the big ship is turning around...I'll take it. By way of Siriusly Depressed, looking at the MF buying action lately shows the support to keep the stock from going down--11/14 reporting was crazy and the 11/12-13 reports weren't bad either (In addition to recent analyst and MSM sentiment changes). The reported 285M short interest as of 10/31, shows the .18 decline since the last move up to .44..and we still have the hedge short to keep things topped off to the upside. But my point considering all of this is the time is near for a move up as the TRUE sentiment on the stock is changing as we speak. MF's know it, otherwise they wouldn't be pouring in like they have recently taking on large new positions and adding to existing ones significantly. The whisper is out but it is just taking a little time for the final short capitulation. They know their day is ending but why would they just give up during another of "one of the worst weeks the Street has EVER seen?" Answer is they wouldn't. They want to wait until they are sure it's truely exhausted. Cause...once this thing starts unwinding, it's going to be a big event and they know it. We saw what happened recently during the 21.5 - .44 move. That was peanuts compared to what is about to happen and they know it. This next tme, it wil not stop @ .44 because it will make much more sense for shorts to turn and ride the upside--which will only compound the squeeze-- as many others begin piling in as well. IMHO, what we're seeing now is the inability to take this down any farther (due to rising and legit support) but not yet capitulation due to market conditions.
Your article today is very helpful concering the 100M facility @4.75% +... and in understanding the timeframes of that facility. Now the company getting down to 210M via stock makes even more sense--as we've been calling for the 1/2 cash 1/2 facility scenario since the Q. I have made predictions where the SP will be @ meeting time and it's not .26. But it's all in its own time. We shall see...
But thanks again Tyler. Great info!
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Skepto
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3 Comments
Nov 16 11:10 AMHard to blame them these days.
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relmor
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731 Comments
Nov 16 11:38 AM-
relmor
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731 Comments
Nov 16 11:47 AM-
cos1000
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1225 Comments
Nov 16 12:02 PMA follow up to the mffais.com info
Having seen sudden changes in mffais.com, mutual fund investment, data before, I did a little research using companies adding to their position as reported. Utilizing this info and that on Edgar on line I was able to understand why the sudden change in numbers being reported. As Sirius reported it 3Q numbers, so too did many of the Mutual Funds in the form of a SEC form 13F-HR. Now mffais gets its information directly from these SEC filings. The date mffais records is the SEC filing date, not the actual transaction date.
For instance one transaction which caught my and others eye was the 174.7M shares purchase by Ameriprise and reported on mffais. Certainly these shares, if a current purchase ,would be significant in trying to figure out the financing or street sentiment. But nowhere other than mffais was this reported. In back tracking through Edgar, the transaction is recorded with a date on the 3Q 13F-hr as 174.7M shares at a purchase value of $99.6 M shares. This comes out to a $1.75 putting the purchase at just at the merger of 7/29 IMHO.
In checking into several of the other transactions recorded, since 11/3, I found that most transactions reported on mffais.com are from these mutual fund company 3Q filings on their 13F-HR forms. Although I believe that this still represents a positive trend, I do not see how the information reflects current MF manger's sentiment. If we apply the mffais reporting changes of the last two weeks to the filings of MFM's reporting to the SEC, the changes in mfais reflect this reporting not real time street sentiment.
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relmor
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731 Comments
Nov 16 12:11 PM-
cos1000
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1225 Comments
Nov 16 12:19 PMThe T Rowe Price purchase for 84.7M shares was also at a $1.75 purchase price. These two purchases reflect 250M shares bought by these two mutual funds, when the merger was announced but before the Aug 5 SEC merger filing details, which would include the 7% convertibles that immediately put a beating on everyone. Don't want to be a wet blanket here, but I don't want to be fooled again...... by skewed data, released when we would all like to hear good news.
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cos1000
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1225 Comments
Nov 16 12:32 PM-
cygnus
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14 Comments
Nov 16 12:41 PMI've reading your posts as well as sl62 and have gotten quite a bit of insight. I have a question regarding your mffais concerns. You mention below that the Ameriprise data would be from around 7/29. If you look at the 13F-HR data for Ameriprise (which you did), there is a 5/6 filing, 8/12 filing and a 11/10 filing (There are others as well). Wouldn't the 8/12 filing show everything between 7/29 and their 5/6 filing and wouldn't their 11/10 filing show everything from at least 8/1 forward?
Just curious.. don't know what overlaps or maybe "fudging" of reporting happens with these filings.
On Nov 16 12:02 PM cos1000 wrote:
> s162
>
> A follow up to the mffais.com info
>
> Having seen sudden changes in mffais.com, mutual fund investment,
> data before, I did a little research using companies adding to their
> position as reported. Utilizing this info and that on Edgar on line
> I was able to understand why the sudden change in numbers being reported.
> As Sirius reported it 3Q numbers, so too did many of the Mutual Funds
> in the form of a SEC form 13F-HR. Now mffais gets its information
> directly from these SEC filings. The date mffais records is the SEC
> filing date, not the actual transaction date.
>
> For instance one transaction which caught my and others eye was the
> 174.7M shares purchase by Ameriprise and reported on mffais. Certainly
> these shares, if a current purchase ,would be significant in trying
> to figure out the financing or street sentiment. But nowhere other
> than mffais was this reported. In back tracking through Edgar, the
> transaction is recorded with a date on the 3Q 13F-hr as 174.7M shares
> at a purchase value of $99.6 M shares. This comes out to a $1.75
> putting the purchase at just at the merger of 7/29 IMHO.
>
> In checking into several of the other transactions recorded, since
> 11/3, I found that most transactions reported on mffais.com are from
> these mutual fund company 3Q filings on their 13F-HR forms. Although
> I believe that this still represents a positive trend, I do not see
> how the information reflects current MF manger's sentiment. If we
> apply the mffais reporting changes of the last two weeks to the filings
> of MFM's reporting to the SEC, the changes in mfais reflect this
> reporting not real time street sentiment.
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shutupsitdown
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1 Comment
Nov 16 01:01 PMif you're holding onto a $0.25 stock in hopes that it will go to $0.42, that's just sad (unless you have 1,000,000 shares). this is all an academic argument. stocks under $2 are always a lot more likely to go to $0 than they are to return to the $2 level. and the only hope for this pointlessly combined company is that it will be able to stay on life support, lose more money, and *maybe* make most of its minimal debt payment on time, while cutting jobs, ruining the programming, and not offering a single new service feature for the next several years.
as a company, sirius was poorly run (xm, too, most likely). combining two losing entities will *rarely* (and by rarely i mean 0.0000001% of the time) result in a stronger combined entity. it's usually (and by usually i mean 99.9999999% of the time) just a bigger loser. as i said, their only hope was to let one or the other go under, and just take over the contracts at pennies on the dollar.
karmazin is not some brilliant businessman (where are you people getting this? from listening to howard's show for business advice?) it's a ridiculous notion. people thought the same thing about bernie ebbers -- he's so rich, he *must* be smart. well, he may be the smartest guy in federal prison today, so, good for him. karmazin is a putz. and he is largely to blame for the current condition of sat radio. it didn't get here by itself, you know.
if you're holding this stock (and i'm not, so i am *not* trying to manipulate anything; do what you want), my only suggestion would be to get your $25/share while it's still trading on a recognized market. reverse splits, prayed-for help from cash-strapped Morgan, just trying to will the stock up to $0.41/share, it's all very sad. people aren't buying new cars, they sure as hell aren't going to buy sirius. and with siri effing up the channels? this is such a classic death spiral (with the attendant spectators on the ground (or, floating a foot or two off the ground, actually) watching it and saying, 'he's hurtling toward earth on *purpose*! what a genius! he'll pull up any second now. he has to! please pull up, please!' and then the plume of smoke behind the trees, and they're still saying, 'maybe he landed safely!'), it will be written about in business school for years. and you'll have the no-value stock certificates and tax write-offs to prove it. i wish you all luck, i honestly do. but i have to tell you, you sound like the most desperate, naive, inexperienced happy jacks in the investing world today. now, please excuse me... i have to take my cool $100 gift card to the sharper image store at the mall to pick up a golf bag with a built-in segway. :)
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cygnus
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14 Comments
Nov 16 01:10 PMOn Nov 16 01:01 PM shutupsitdown wrote:
> who cares? xm and siri should have fought until one of them went
> chapter 11, then chapter 7, and the other one scooped up the spoils.
> it was a good technology, and a good product (i'm a 5-radio xm subscriber,
> and got my first in 2003), but there is simply no expanding market
> for this service. people worried about their jobs won't pay for radio
> for the next few years.
>
> if you're holding onto a $0.25 stock in hopes that it will go to
> $0.42, that's just sad (unless you have 1,000,000 shares). this is
> all an academic argument. stocks under $2 are always a lot more likely
> to go to $0 than they are to return to the $2 level. and the only
> hope for this pointlessly combined company is that it will be able
> to stay on life support, lose more money, and *maybe* make most of
> its minimal debt payment on time, while cutting jobs, ruining the
> programming, and not offering a single new service feature for the
> next several years.
>
> as a company, sirius was poorly run (xm, too, most likely). combining
> two losing entities will *rarely* (and by rarely i mean 0.0000001%
> of the time) result in a stronger combined entity. it's usually (and
> by usually i mean 99.9999999% of the time) just a bigger loser. as
> i said, their only hope was to let one or the other go under, and
> just take over the contracts at pennies on the dollar.
>
> karmazin is not some brilliant businessman (where are you people
> getting this? from listening to howard's show for business advice?)
> it's a ridiculous notion. people thought the same thing about bernie
> ebbers -- he's so rich, he *must* be smart. well, he may be the smartest
> guy in federal prison today, so, good for him. karmazin is a putz.
> and he is largely to blame for the current condition of sat radio.
> it didn't get here by itself, you know.
>
> if you're holding this stock (and i'm not, so i am *not* trying to
> manipulate anything; do what you want), my only suggestion would
> be to get your $25/share while it's still trading on a recognized
> market. reverse splits, prayed-for help from cash-strapped Morgan,
> just trying to will the stock up to $0.41/share, it's all very sad.
> people aren't buying new cars, they sure as hell aren't going to
> buy sirius. and with siri effing up the channels? this is such a
> classic death spiral (with the attendant spectators on the ground
> (or, floating a foot or two off the ground, actually) watching it
> and saying, 'he's hurtling toward earth on *purpose*! what a genius!
> he'll pull up any second now. he has to! please pull up, please!'
> and then the plume of smoke behind the trees, and they're still saying,
> 'maybe he landed safely!'), it will be written about in business
> school for years. and you'll have the no-value stock certificates
> and tax write-offs to prove it. i wish you all luck, i honestly do.
> but i have to tell you, you sound like the most desperate, naive,
> inexperienced happy jacks in the investing world today. now, please
> excuse me... i have to take my cool $100 gift card to the sharper
> image store at the mall to pick up a golf bag with a built-in segway.
> :)
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cos1000
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1225 Comments
Nov 16 01:17 PMYou are write to check quarterly closing dates to make sure what is or isn't included. Ameriprise Financial 13F-HR filing of 11/10/08 was for their quarter ending 9/30/08. That quarter then would be 7/1/08 - 9/30/08. The date that I site was from a candlestick chart review and 7/29 was a day that included the 1.75 price intra-day and the Volume that day was over 250M shares, so that is my estimated transaction date. The other filing dates you stated cover 1 Q ending March 30th and filed on 5/6 and 2Q ending on June 30 th and filed on 8/12. Most companies take 4-5 weeks from the quarters closing date to report their results to the SEC.
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Siriphone
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51 Comments
Nov 16 01:20 PMWho the F are you? I love how these "Brilliant Strategists" have all the answers on their first posts. It is all academic right? If the nature of the stock market was all academic, then why waste time trolling blogs? Why wouldn't you spend all of your time looking at the history of the market, make your academic predictions, and rake in your millions. This guy is giving SP advice on his first post. What, did mommy and daddy buy you a 'puter for christmas?
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cygnus
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14 Comments
Nov 16 01:43 PMStill.. would seem to be a positive with the numbers steadily increasing. The further we move along, the further we get away from "merger numbers" and more into post merger accumulations/reductio...
On Nov 16 01:17 PM cos1000 wrote:
> cygnus
>
> You are write to check quarterly closing dates to make sure what
> is or isn't included. Ameriprise Financial 13F-HR filing of 11/10/08
> was for their quarter ending 9/30/08. That quarter then would be
> 7/1/08 - 9/30/08. The date that I site was from a candlestick chart
> review and 7/29 was a day that included the 1.75 price intra-day
> and the Volume that day was over 250M shares, so that is my estimated
> transaction date. The other filing dates you stated cover 1 Q ending
> March 30th and filed on 5/6 and 2Q ending on June 30 th and filed
> on 8/12. Most companies take 4-5 weeks from the quarters closing
> date to report their results to the SEC.
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Scot's Slant
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43 Comments
Nov 16 01:46 PMAs any good general prepares for a looming battle, a contingency plan is in place where if one avenue of attack fails, there is another viable plan to save their troops from slaughter. And this is what Mel and his team are doing with the reverse split contingency as they do not wish to leave a legacy of failure that resembles Custer's last stand in the Battle of Little Bighorn....
By the way, one more small thing: when you say, "if share price goes to high," wouldn't this be good news where more drastic contingency plans will be abandoned with the company moving in a positive direction? And as for a reverse split, what is the fear there? A split does not equate to a loss in value of shares -- it simply reduces the number of shares...
Scot's Slant
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concernDR
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3 Comments
Nov 16 02:02 PM-
siriusly depressed
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162 Comments
Nov 16 02:17 PMI've been checking MFFAIS everyday with excitement.
I started getting concerned yesterday and then more so this morning when I realized the discrepancy between the volume for SIRI on MFFAIS and the the daily volume traded for SIRI.....
My hope was that there was a 5 to 7 day delay in the reporting for MFFAIS. But as you've discovered, it's worse than that.
If this MF interest is from the time of the merger, then that means they were fooled like us.
Which makes me VERY curious as to what they've done with these shares since then............
MF could have been dumping shares for the past month and we wouldn't know it..................
I wish we could get current info on this............
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concernDR
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3 Comments
Nov 16 02:41 PMI agree, I voted down both on the upcoming Vote. It seems as if the Board is manipulating the stock for a privatization, leaving us stock holders high and dry. The theory out there is that Mel is shorting his own stock to drive the price down, so why should we listen to any recommendation he makes. To all stock holders, VOTE NO to both reverse split and Dilution in upcoming meeting.
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concernDR
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3 Comments
Nov 16 02:45 PM-
Pj568
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182 Comments
Nov 16 02:48 PM-
FoolNHisMoney
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33 Comments
Nov 16 03:23 PM-
FoolNHisMoney
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33 Comments
Nov 16 03:24 PM-
cos1000
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1225 Comments
Nov 16 04:53 PMAn important point and your math is correct, sorry for the mix up and thanks for double checking. There isn't any one day that the share volume was at that price in the quarter reported. Even multi day purchases would have had to have been in the last days of Sept or a private sale.
In general mffais.com reports its results on MF based on changes from each company's share volume from the last time the company reported information using SEC 13F information and the equities (SIRI's) cusip identification number. Further looking at the Ameriprise transaction, as
reported in mfais.com reveals last reporting Ameriprise had 6.35M shares and added 168.5M shares this reporting period taken off the 13F statement for now a total of 174.7M shares at an average price of $.57 cents / share. It would appear that not much more than that can be gleaned from these numbers. Dates of the purchases are not available, but as discussed above, at this price multiple purchases of shares over several days at the end of the quarter would have gotten them their. At best, without a company filing an mid quarter 13F, we are looking at quarterly changes in each company reports trend; add some, sold some, new position, sold position. For companies with comparisons available, we can also see how the fund has performed since a position was taken, in the mffais column all the way to the right. Changes in mffais reporting from week to week is less relevant than changes corresponding to MF reporting quarters, IMO.
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siriusly depressed
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162 Comments
Nov 16 05:08 PMWe've talked about the low 50's,,,,,,after seeing MFFAIS, that seemed to be increasing.
BUT, now that we know that those numbers are delayed, where do we find a accurate, up to date number......
I don't like what I'm seeing on nasdaq & the brokerage sites......low 30's.
We were feeling real good about what the mutual funds were doing...
I'm now very concerned that those increases in SIRI positions were based on the merger timing...........
I wi