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GM/Chrysler Merger Could Be Very Interesting for Sirius

by: Tyler Savery October 12, 2008 | about stocks: GM / SIRI    

Tyler Savery

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If we all thought the merger process of Sirius and XM brought interesting times, imagine all of the comments that will come if Chrysler and GM pull the trigger on a rumored merger/acquisition! One thing that may be certain is that the auto companies can cite a “failing business” as a reason that such a deal should be approved.

For satellite radio, the deal could be very interesting: The biggest XM OEM partner joining up with the biggest Sirius OEM partner. As sector followers are aware, GM has an exclusive deal with XM, and Chrysler with Sirius. Interestingly, the GM deal has clauses that speak to what could transpire if a GM brand were to install Sirius radios, and that may bring about discussion of getting a fully interoperable radio into the OEM channel earlier than may otherwise have happened.

Now, to be clear, the satellite radio deals could play themselves out as currently structured. However, an automotive marriage could also mean that Sirius XM Radio (SIRI) will get a chance at renegotiating the current deals. It is widely known that the GM deal is expensive for satellite radio, and more than one analyst had made reference to that fact. Thus, it would benefit Sirius XM Radio to at least try to better their current deals should GM and Chrysler hook up.

Cerberus Capital owns 80.1% of Chrysler, and 51% of GMAC (the financing arm of GM). One proposal would have Cerberus trading their stake in Chrysler to GM for the remaining 49% of GMAC. It is an interesting proposal. Chrysler sales are way down, and credit markets are tight. The deal would solidify GM’s position as a sales leader. Toyota (TM) has been chipping away at GM for a few years, and sometimes has been known to outsell the biggest U.S. car maker.

If there was ever a time to propose such a deal, it is now, and it may just have a decent shot at passing regulatory muster. The markets next week will be interesting to watch as the government takes a stake in big banks, and big automakers try to find solutions to their sales woes.

Position - Long SIRI, No Position GM

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This article has 102 comments:

  •  
    Oct 12 10:33 AM
    Makes you wonder what an employee at Ford feels like these days? I can't imagine Chrysler and GM employees not being happy about the merger.
    Reply
  •  
    Oct 12 12:02 PM
    Fine - and have GM and Chrysler give their shares of the $25B back to the Feds - can you believe that those monies (our money) went to essentially a private entity: Cerberus?????
    Reply
  •  
    Oct 12 01:14 PM
    Tyler thanks for keeping us informed. A merger of both GM and Chrysler would in my opinion be a real plus for Sirius-XM stock holders. There is much hope for those who hold the stock and there is good reason to be optomistic. CEO Mel and team will not let the stockholders down.
    Reply
  •  
    Oct 12 02:43 PM
    How long before we see $1.00 again? Is a stock automatically de-listed from the NASDAQ or is there any discretion?
    Reply
  •  
    Oct 12 03:20 PM
    We will see 1.00 a share as soon as a reverse split is announced I am sorry to say. Truth hurts.
    Reply
  •  
    Oct 12 03:34 PM
    Certainly it is important that the big 3 automakers in the U.S. be kept afloat for the sake of SiriusXM and its success going forward. It has been my observation through the years that the automakers are not allowed to fail, and in this present situation this will continue to be the case. What would really be interesting is if GM, Chrysler, and Ford all merged into one company. Wonder what the chances are of that happenening? Probably slim to none, but then again lots of things have transpired in the past few months that were unthinkable even as recent as last year.The government will step in as needed to preserve the auto industry in America, although they may end up owning them as well. We are crossing a line when the government invests in the stock market as the potential for manipulation could become an even more terrifying scenario than is being witnessed presently. As we trudge through the rest of this year things will improve, despite the doomsdayers. The economy provides great political theater at the moment, but for those that do not get caught up in the emotional roller coaster ride will find that it will get better in time. It always cycles back around. Sirius will be fine and so will its shareholders.

    Long Sirius
    Reply
  •  
    Oct 12 03:42 PM
    Omagod500

    As I understand delisting Sirius would have 180 days to bring the stock back over a dollar. The warning will be issued and then they have to resond in this amount of time. I could be mistaken, but this is how I have heard it explained.
    Reply
  •  
    Oct 12 04:18 PM
    So the price for SIRI will go up quickly?
    Reply
  •  
    Oct 12 05:16 PM
    if i know mel, he his sitting back and laughing. he always has something up his sleve. i have been following him for a long time and he works at his own pace. he will not let the share holders down. just have patience and it will work out. i for one have a lot to loose if the common shares are wipped out. but i am thinking positively. i have faith. just stick to your guns.t.m.
    Reply
  •  
    Oct 12 05:47 PM
    I'm sorry to say crocof....
    A reverse split is still a long way off for SIRI....
    As you have seen about three weeks ago... SIRI got back above $1.00. Then....
    The sell-off began... Nearly every stock all over the WORLD went down... Even Businesses with proven strategies, growing consumer bases, and positive balances fell sharply for the last two weeks. So don't think that a reverse split is the only way out for SIRI... Once money begins flowing back through the markets, SIRI will be back up around .80-1.00 range. Then we wait for Mel to announce the financing and...Voila.

    By the way, I believe shorts will begin to cover by the end of the week for fear of being stuck after the "Rip your Face of Rally" (as Fast Money would say) due this week....
    Reply
  •  
    Oct 12 05:55 PM
    And if you want Numbers.....

    Just look and listen to the writers, Cos1000, relmor, sl62, 163888... and the others I might have forgotten....

    And if you are a Holder of share and need a Cheer Me Up, Read the stories that Killerkaul has been writing, although I believe the battle has slowed this weekend....Maybe it's the silence before the storm....??
    Reply
  •  
    Oct 12 07:02 PM
    crocof, your name says it all.... you are a troll just coming here with vague pronouncements, knowing nothing of which you speak.

    omagod, the NASDAQ has delisting rules that have been changed or suspended before. In February, 2003, the last time Sirius was trading at these numbers along with many troubled companies, the announced the following:

    ... Nasdaq, the US technology exchange, has extended the time that companies have to meet its minimum share price rules, because of market conditions.The stock market said it was suspending for a further year, until December 31, 2004, the requirement that companies with a share price less than $1 ([euro]0.9) be thrown off the market....

    In addition Sirius' stock price is not the only criteria for delisting, market cap and the fact that NASDAQ makes money on every transaction will be another consideration. Sirius is regularly in the top 10 most traded companies. The worst that can happen for now is a notice of non compliance with listing criteria. Then is a hearing is filed within seven days, one will be held usually within 30-45 days, then after a decision, the 180 day clock will start.

    Nasdaq has already commented about how their has been a dramatic increase in companies trading under a buck during this downturn. I would not be surprised if a similar suspension of this delisting criteria, under a buck, is not put into place to prevent member companies who only have this issue not met. That would not mean that the other criteria for delisting would be suspended, just this one.
    Reply
  •  
    Oct 12 07:57 PM
    Tyler thanks for keeping us Informed????? HUH?? This merger stuff is already OLD NEWS.....This is so so minor of a factor on whether or not Sirius XM survives. Your'e only digging hope where it's already been dug.

    The biggest challenge is getting those coverts renegotiated so they don't have to seek protection from creditors.

    Reply
  •  
    Oct 12 08:16 PM
    225305, what happen to your leveraging and buying 4000 shares on Aug 29th, and telling everyone to buy now while the price is cheap? You told us that 6 months wasn't long to wait for it to be selling at three times the price. Five days later your telling everyone to sell, sell, sell, before you lose all your money. What's up? Day trading or just another troll spouting off???

    Careful friends.... the enemy is everywhere..... trying to break us down and infiltrate our lines. Thanks to the new weapon given to us by Seeking Alpha we can now quickly review these imposters posts. Be vigilant and don't give your shares up to anyone.
    Reply
  •  
    Oct 12 09:59 PM
    People who live in major US City can take satellite radio for granted, there in no better way to listen to your favorite radio station on Sirius/XM no matter where you are in the US and believe me more and more people who live in rural America are finding out more about satellite these days. GM and Chrysler bond together is a good thing for satellite radio, just go on Sirius website and see who many car manufactures have signed up for satellite radio service for their customers. OEM numbers will surprise everyone.

    Reply
  •  
    Oct 12 10:14 PM
    Nice cos1000...

    I've said this before and relmor just said it again recently. The people here who have negative things to say can only say something baseless and stupid. A one or two liner not backed by facts, thought or intelligence. Thanks crocof, for maintaining that flow! Really crocof? The truth hurts? Try this truth on and see if it hurts...you're extaordinarily unintelligent! Sad to say!!! You probably don't even know what reverse is--that's clear. Because if you did you would be able to refrain yourself from saying something so pathetically wrong. Here's a challenge. Maybe crocof, you can be the king loser and try to stand up for yourself (and all the other one line losers who post here). Tell me EXACTLY why SIRI will reverse and when and...yeah, why don't you also give me the ratio they will need to use so it makes sense with their company metrics. Please give me some facts crocof!!! I'll be waiting for your reply!! I won't be holding my breath though if that tells you anything...
    Reply
  •  
    Oct 12 11:05 PM
    Will be very interesting week! I just read tonight that the big meeting this weekend yielded a bunch of european guarantees--no real concerted moves though so who knows how the market will react to that. But nothing from the U.S. since Friday's news of buying into banks through preferred stock. Euro's today talked about direct capital injections and Paulson talked about capital through preferred stock Friday but I've read nothing about inter-bank guarantees. My guess is they will continue to do what they've been doing. Wait and see day to day if things will work themselves out--doing a few things piecemeal here and there. So far that's been a bad bet by gov. But any conspiracy theory would tell you it's all intentional to allow the markets to correct (in a semi-orderly fashion without too much jumping out of windows). So far mission acomplished.

    A few numbers for reference. It just looks like we're hell-bent on recreating the '02 picture. If so, here are the numbers we will need to hit. One theory is that since we've since gone much higher on the Dow than we were in '02, maybe the equivalent floor is higher--kind of where we are now and were last week. The puzzling part is the Nas never did retrace back to it's 00 highs of 5000 so hard to correlate. Yet the Dow did well-surpass it's '99 high of 11.5 up to 14.1. S&P on the other hand was extraordinarily consistent in both periods peaking just over 1500. So I guess if you, like many, use the S&P as guidance, we should need to hit the '02 lows before we bottom out. Where that will leave the Dow and Nas it would be hard to say exactly, but the trend has been about 50 S&P points per roughly 500 Dow and 100 Nas.

    So right now we're 124pts from the '02 S&P low (768 on 10/10/02). This would ostensibly = -1200 on the Dow from here or 7251. The 02 Dow low was 7197.49 on 10/10/02. Hmmmmm. Makes you wonder. But if nothing else food for thought. You can also see by the numbers that in '02 the Dow capitulated with a 1000 pt snap back in 3 trading sessions. And that was back in the days when a 300pt move was extravagant. Today that 300 pt move is a 500-600..so do your own math...question is will we snap back some this week then plunge to the actual low or... "are we there yet?" Either way SIRI plows through like a champion...


    Nasdaq
    Date/High/Low/Open/Clo...
    10/09/02 1,135.89 1,112.08 1,117.14 1,114.11
    10/10/02 1,165.83 1,108.49 1,116.76 1,163.37


    Dow
    Date/High/Low/Open/Clo...
    10/09/02 7,500.03 7,282.39 7,499.96 7,286.27
    10/10/02 7,560.93 7,197.49 7,286.34 7,533.95
    10/11/02 7,901.26 7,540.74 7,540.74 7,850.29
    10/14/02 7,915.00 7,745.70 7,848.21 7,877.40
    10/15/02 8,255.68 7,883.23 7,883.23 8,255.68
    10/16/02 8,232.10 8,013.41 8,232.10 8,036.03
    10/17/02 8,318.45 8,038.24 8,038.31 8,275.04
    10/18/02 8,331.56 8,147.20 8,287.72 8,322.40
    10/21/02 8,547.83 8,230.50 8,320.74 8,538.24


    S&P
    Date/High/Low/Open/Clo...
    10/09/02 798.55 775.80 798.55 776.76
    10/10/02 806.51 768.63 776.76 803.92

    Reply
  •  
    Oct 12 11:26 PM
    Hey check it out....
    They are starting to inject money into infrastructure... just like FDR did in the 30's.... instead of "Building" all of this stuff....they are "Re-Building"... these things!

    I just thought it was a cool similarity

    Anyways......

    sl62,
    Are you being serious when you say "SIRI plows through like a champion"
    or are you just cheering like the rest of us??
    Just Wondering
    lol
    Reply
  •  
    Oct 12 11:27 PM
    Well, What I meant to ask is,
    Do you think it's a serious chance that SIRI will plow through this week...?
    Reply
  •  
    Oct 12 11:59 PM
    Everyone on here needs to buy a sub to Siri XM and spread the news to others to buy a sub!
    Reply
  •  
    Oct 13 01:02 AM
    Does anybody on this board know much about the technical aspects of satellite radio? For example, what are the chances that sirius and xm can broadcast from the same satellite fleet in the future? I read in Wikopedia that xm has effectively two in-orbit (powered down) spares now, and sirius has a spare in a box ready to be launched if needed. I'm curious about how the "merged" company will eventually become really one business, rather than two entities under one roof.

    Another question: does the company get any benefit from making use of emergency channels (i.e. during a hurricane) other than free advertising and good will? For example, does FEMA or any other government agency pay for use?

    What happened to the royalties lawsuit against xm some time ago?

    One final comment: I hope that this company doesn't go private because I want to be in on the profits that will be made in the future, rather than be squeezed out so a hedge fund, etc. can make all the money. My shares are for sale with a "good until canceled" order at $20, not because I expect it to happen overnight, but because I think this company has a great future...

    Thanks in advance for answering my questions.

    Reply
  •  
    Oct 13 02:28 AM
    Chesspower, you should also do a "stop" price of .20. That will execute before 20/share.
    Reply
  •  
    Oct 13 02:56 AM
    casey, maybe those overpaid workers are happy to see the merger but doubt it they are. All they worry is their big fat benefit gone if GM is gone.
    Think, casey, who brought upon the collapse of GM & Ford ? They did.
    Throughout the last 50 years, when workers strike, every unions jumped in to join them, as if GM & Ford were their enemy. The government should never give any loan to a company whose workers keep tearing it down. When workers have no loyalty, business won't survive, period.
    The next Big Collapse will be Boeing, and its happening now. Get rid of your BA shares while still worth something.
    Reply
  •  
    Oct 13 06:14 AM
    Maybe so, 305...But I've seen two kinds of investor panic: Those that are trying to sell before their stock(s) tank and those that closed their position(s) and are trying to get back in before it's too late.

    On many message boards people have talked about market manipulation. When the MM's are ready to move a stock up, they can blitz it to the moon before the common investor can react. I've been pleasantly surprised in the past by unexpected (no announced news) moves up in pps. The news seems to "catch up" later after the pop.
    Reply
  •  
    Oct 13 09:30 AM
    I am trying to understand the concept of convertible bonds as they relate to stock price.... I invite criticism and correction please...

    Is the following situation an rough conceptual reflection (I fudged the numbers so they are not exact) of what is going on with SIRI and convertible bonds?

    SIRI, trading at $2.25/share, needs cash to pay of some XM debt, which they needed to do to merge. They say "Hey we need some cash! Who wants some bonds??" At some points it becomes clear that they will not be able to obtain the necessary cash through standard bonds... their choices are to negotiate a ridiculous interest rate of offer a different type of bond with some other incentive for the bondholder... convertible bonds... Here is where I am cloudy...

    A convertible bond is convertible into shares at some point? When? how does the $1.50 figure play into this? What happens if SIRI is trading at $0.50/share when they mature? What has all the mention of the $3.80 or some figure in that area that would be required to be met for something to happen?? Any help or explanations would be greatly appreciated!

    RJO
    Reply
  •  
    Oct 13 10:41 AM
    Well This...

    IMO, SIRI has always performed well under their extraordinary circumstances and now in such a crazy market spiral--and continue to do so. Jeez, talk about having 2 hands tied behind their back--and yet here they still are, denying the doomsayers...Bent but nowhere near broken. What will unlock SIRI short-term is the definition of credit easing--which we should start seeing this week. Maybe back to around buck by end of week. The market is receiving the current euro plan/news well today. Now U.S. needs to take the lead tomorrow. Bond/Bank/Credit markets are closed today so it gives U.S. an extra day to finalize then release. They need to be specific. Regardless of what the overall market does right now, what's important to SIRI is a clearing of this credit jam. Alot of things are starting to fall into place. The fact that the whole world is in on addressing this bodes well for a much faster recovery for everyone.

    I saw this morning that the Sweden rescue took 4% of their GDP--which they recouped within 10 years. Our current debt is 10T against a 14.4T GDP-- about 70% (highest since the mid 50's btw...in 1950 it was @ 90%). The TARP at full value of 700B = 5% of GDP. It is even questionable if that entire 700 will be needed. By even adding another 500B to that figure for bank injection/gaurantees wouldn't hurt anything at this point--in which all this money should be recouped. The U.S. is not the highest but a still respectable Fitch rated TrippleA. So...wtf...go for it, get borrowing and get this s#%t stablized. It appears the rest of the world is doing the same things.
    Reply
  •  
    Oct 13 11:12 AM
    oh no !!!!! bush is on tv, everytime he talks market becomes more of a mess
    Reply
  •  
    Oct 13 11:16 AM
    The GM / Chrysler merger would be good for consumers and Siri Stockholders. With many companies slowly being bought up by foreign investors, I am glad to see U.S. companies merging together...But we still need to see Sirius in the short term get funding for their loans.. The auto companies are long term...and the stockholders are taking a beating now! I believe if Sirius even thinks of bankruptcy or doesn't do something soon they will lose millions of subscribers because most of the shareholders are also listeners of satellite radio and if they betray their stockholders, as they seem to be doing, the stockholders will drop their subscriptions.... So, ending satellite radio... So, Mel it's time to tell us what is going on? Penny stocks are humiliating to the long term stockholder....
    Reply
  •  
    Oct 13 11:39 AM
    224767...

    I don't think that the shareholders that are subscribers are there just for good faith... I think they are there for the radio, therefore I don't think that they will drop their subscriptions.... and the ones that do based on that fact you stated... are just dumb.
    Reply
  •  
    Oct 13 12:38 PM
    224767 - Even if I wasnt a shareholder, I would never give up my subscription. I cant even listen to terrestrial radio anymore.
    Reply
  •  
    Oct 13 12:49 PM
    224767...

    Sorry but you're a delusional cry-baby. If you own shares, please sell today and be gone with you so we don't have to put up with your whining. Would you like some cheese with that? Thank you.
    Reply
  •  
    Oct 13 01:36 PM
    Wow. Stock price level management central today... I just checked in with SIRI and caught another 1M bid block in L2--a lot of 100K, 200K, 300K to go with it. Anyway, a comfortable place to be range-bound today. I'll take it.
    Reply
  •  
    Oct 13 01:55 PM
    ARI D K, It is actually more popular in the big cities just look at the places where the most subscribtions are. That might be just because of where the populations are though.
    Reply
  •  
    Oct 13 04:06 PM
    HOLY S@%t!

    Dow +950. Whew...never before seen!

    SIRI gets a big atta boy...not bad on 52M...
    Reply
  •  
    Oct 13 04:31 PM
    I was just thinking as I look at the change in my portfilio today that it's too bad when you just made thousands in a day that it only "money made back" rather than "money made". But hey that's the game...

    OK. Now it's time to get SIRIUS! I believe November has always been their best month. So it starts today. Tomorrow we get more news from the gov about stablizing-- then the banks start lending, then Libor comes down, then rates start getting better, then more shorts cover up, then Q3 comes in in-line, then comes Mels upside surprise about EOY subs that he low-balled, then idiots stop posting here, then they announce the refi with a decent interest rate, then more shorts cover, etc..., etc..., etc....

    One step at a time but...bring it on!!
    Reply
  •  
    Oct 13 04:34 PM
    Finally a solid uptick in Siri. Will it hold. Or will it be beaten down once again.

    Killer................... the ladies away from the Big Blue Dog. We need him at full strength when Mel turns him loose on the scumbags that are holding him back! We don't want his legs getting weak in the home stretch!
    Reply
  •  
    Oct 13 04:36 PM
    Sl62

    Agreed...except the idiots posting here should be at the top of the list!!
    Reply
  •  
    Oct 13 04:36 PM
    YOu guys better be buying subs out there and spreading the news! Have your friends get subs too!
    Reply
  •  
    Oct 13 04:45 PM
    Aristotle at MF just posted another article about Siri and gave 5 reasons that are keeping the stock under .50. what an a-hole.
    Reply
  •  
    Oct 13 05:11 PM