By Steve Garcia
If you follow Sirius XM (SIRI) stock or are a subscriber to XM or Sirius and are also a stockholder, then you know the pain I and many others have felt over the course of the past several years. To say it has been a dangerous journey up a steep and slippery slope is to understate the events we as shareholders have had to endure and dig through to get to the root of the situation. The crux of the problem is that many people who have bought and loved the service, also jumped into the financial markets and bought stock of the companies, either before or after the merger, with visions of the stock paying off in a big way at the end of their particular dream. That may well be the final intended act of this stock, but to date, this has been an educational exercise in futility and humility of immense proportions.
So many people have already lost so much with this company…..and as much as I feel for them, I also applaud those who have stuck it out. For as the old saying goes, “nothing good comes easy,” and there is a price to pay for everything. The common shareholders are a front line example of that. There were several missteps along the way, the merger and all its delays come to mind. Many of us watched helplessly, thinking as the stock price dropped……that somehow it was a mistake…and it would all be fixed within a few months. This is an especially difficult thing to say for those who still don’t understand, but there is no quick fix.
Those of you who think this stock is going to magically return to premerger prices, or even post merger prices of last year, are surely in a game you don’t belong in. The news of this past February that ensured Sirius XM would live on and more recent re-financing news seem to ensure the survival of Sirius XM at least through 2012 and yet probably still brings little indication of where the stock is headed.
Kaufman Bros. wrote in a report several months ago that while the Sirius platform is highly specialized, the more generic XM satellites could be used for other services, such as capacity to expand high-definition satellite TV offerings or “even a competitive satellite broadband offering for rural customers.” Could this be why we see no devices to compare with the Grace wireless radio and the Tivoli satellite radio for XM. Is this part of the future plan for the XM side of the company?
Keep in mind that last year Charles Ergen paid $700 million for wireless spectrum that could be used for mobile video services and, before that, paid $380 million to buy Sling Media, which produces equipment enabling viewers to watch their home TV from remote location. Ergen was looking to buy Sirius XM for a strategic reason and this just might be part of a plan yet to be revealed. Regardless of the reality of these reports and Ergen’s attempted takeover play, one has to believe that things are on the upswing as better news continues to trickle out, even with the horrible state of the economy.
Of course I can also say that if anything is true, it is that Sirius XM shareholder blogs are where you will find passion, concern, intelligence and focus on something we all seem blinded by; Sirius XM Radio and its issues that need fixing for the strength and ultimate survival of the company. The release of the iPhone application and the recent 500 plus million dollar debt offering which was mostly refinancing and whose notes were in high demand was a step in the right direction.
The majority of SIRIUS XM debt is now pushed out to 2013 and 2014, giving the company even more breathing room. There appears to be much smoother sailing on the immediate horizon, though recent stock action suggests the waters are still quite murky. We can only hope that the powers that be have had the foresight to think over the horizon, as they battled to make it out of the latest storm intact.
The 2014 debt associated with lent common stock shares for shorting purposes now needs to be addressed going forward. The second quarter conference call is less than a couple of weeks away. While auto sector numbers were not stellar for the second quarter, the company did try to mitigate the situation by ramping up several pre-owned auto programs that included free trial periods with the purchase of the vehicle, much the same as many of the new car programs. Will these programs in addition to the iPhone app give us a reprieve on subscriber numbers? More likely no than yes, though the negatives may be much smaller than some current thought suggests.
As a shareholder, I am hoping for the best on that front, but preparing for the worst.
Position: Long SIRIUS
Encouraging and Sobering at the same time. Reminds me that as a long suffering long, I indeed am not alone.
I do applaud those that stuck it out and didn’t panic sell…but at the same time if I knew what was going to happen post merger I most definitely would have sold. Having held tho, I am most proud of when I didn’t sell back in February when we plummeted to .05 cents a share and the threat of BK was all we heard. I guess at that point, I had so much unrealized losses that out of sheer stubbornness, I simply refused to cash out. At that point it seemed almost absurd to. Instead, I not only held on, but for the first time in awhile actually started buying up shares(something I vowed not to do again). I am so glad I did, because I was able to lower my average pps from $6.50 all the way down to just under a buck. My only regret is that I didn’t have more cash on hand at the time, otherwise I would have been able to cash out when the stock popped up to .60 cents after Malone came to the rescue.
I still get that sinking pit in my stomach from time to time, but all in all, I am more hopeful about the stock and company than I have been in a long while. Just the fact that they survived all this during the worst economy since the great depression is encouraging.
As painful as it has been to own this stock the last 4 years, I have learned much from the experience.
Until Sirius gets over a buck again, I won’t feel completely secure. Once that happens, a huge weight will be lifted off me and my anxiety about this stock will disappear. I look forward to that day.
Encouraging and Sobering at the same time.
Well said.
This is as clear and conscience, realistic as anything that has been stated since I have been involved in this journey. Outstanding job Steve. Not speaking as one who is as long suffering as those who I can only imagine their pain but having had a similar situation elsewhere, watching a small fortune dwindle down to underwater status … Reality.
I have been musing just where the emotional attachment that is so often taught to be suppressed has it’s grip if we were more honest when it comes to this stock. I understand it completely so it’s not a dig but if the goal is to make money we would have already been better off buying up that little Canadian sister stock XSR that had reached .85 recently than to continue with that other strategy called ‘hope’ that is just as counterproductive. It’s difficult to say that when so many long suffering longs are holding so many shares and have averaged down to a point where they could still turn a profit or at least break even. Feel foolish even making a noise here. I am one of the fortunate ones having got in cheap and will do fine short of it tanking under .28 cents. Just as well, the patronizing that it might be construed as is nowhere close to the truth. Those of you here and even elsewhere have educated this fool in so many ways that I will always been grateful and will continue to follow the stock but more importantly the people long after I am out of it. I intend to stick to my plan (Yea, right!) if and when it tickles the right price – But for myself it is relatively small potatoes, if I make 7 to 10K off of it in the 8 months to a year that it is approaching I will have met my goal. I know that is what some here play with just day trading … I honestly don’t have that kind of fortitude and to you that do … What can I say? Someday perhaps, if my bankroll ever was some great multitude that could afford that risk. You guy’s are champions in my book – Diligent beyond hopeful (to contradict myself), intelligent and hardy, as as,er Steve put it ‘passionate’. Honestly, what I make is of no major consequence, there are other avenues that are paying off right now – I will be just ecstatic to see all of you rewarded and the forums turned into high-fives and back-slapping and smiley faces galore. Honestly. One of these days your ship will come in. In the mean time appreciate the realistic, pulling no punches way you laid this out. Best yet. Great work.
There is no hope for this company. There is just not enough money in their business model. It’s not worth the effort — huge revenues with tiny margins. Why would you buy shares in a company that has hardly any margin in their best-case scenarios? If you are looking to speculate go to bio-med. if you are looking for mid-term gains go to gaming stocks (LVS will probably be around $15 at the end of Q1 2010). What the hell are you doing here?
In my own opinion,I believe this is the beginning of SIRIUS to be alived and will start making profits in coming months….Just be patience if YOU still have some left. Just forget the past think for the future…
Thanks,
RJPOGI
No one told you to invest in SIRIUS in this article. Why would you read the article and then make recommendations to look to other sectors to invest. You are barking up the wrong tree here…this is not a forum full of uninformed weak shareholders who sell at the first sign of negativity. You’re in the wrong place if you are looking to buy some shares on the cheap to play some day trade games.Give me facts…not suppositions…..the company is just now looking to profitable times…and with the automarket heading back towards stability, and the increasing possibilities and revenue streams..I see some VERY profitable times on the horizon….you are either uninformed, not up to date with your comments, or a basher with an agenda.
I’m a stockholder for several years, and feel the pain as does everyone else in my shoes. I must say, in the cold light of day, I don’t see SiriusXM having a sustainable business model. They spend too much money on talent for not enough return. Chris Russo who gets 3M+/year complained he was the least listened to station on the service. Oprah channel has tiny listenership, yet she Martha Stewart and others have ridiculously bloated paychecks. They are hiring Rosie ODonnell for large money, I fear the same outcome. None of these big names attract subcribers in any real numbers. Yet even as they came within minutes of bankruptcy, weeks later they are still hiring for crazy numbers.
There is no doubt the economy let alone the long drawn out merger is the main culprit to the down turn in this stock. We will bicker amongst ourselves as this stock moves into the future. Yes I bought this stock w/ my heart because I feel lost with out my Sirius radio. But I bought it with my head to for the same reason. The upside of this scenerio is though we are still in an agonizing long hopeful journey, it forced this company to come back down to earth and re-tool itself to be more cost effective and prudent. There is no doubt Sirius Xm is forced to look at new types of revenue streams besides the automotive industry which we all should welcome a company that has diversity. Know we wait again hoping this economy recovers sooner than later. If the recovery is not too far off in the future we all pretty much would know & agree our day will come. I remember selling some stocks in early 2002 (during an economic down turn)that if I would have held on to would have been paid me back 10 fold. I’m not going to make that same mistake, and my average cost per share when I bought this stock was over $7.00, although it is know closer to $2.00. There are no doubt a lot of sour grape-rs out there, but no one had a gun to their heads to buy the stock in the first place. I’m in for the long haul and I still plan on making a nice profit too!
Rebecca, you make some valid points on the pricey talent. I would like to see them bring in some new bright talent & sign them to a long term low cost contract. Then promote their new rising star (like a baseball team does w/ promising talent). If after a fair period of time and it doesn’t stick to the wall it’s not giving the store away to let them go. By the way Mad Dog Russo might be famous to a degree in the New York City area but I don’t think they did a marketing study outside the Big Apple. OVERPAID!
Steve…..very good brother….FYI….you are being posted on the NYTimes site
I too have concerns over the amount of money that the Ophra’s…Martha’s are getting paid….can’t help but think at the least there would be some kind of stipulation in that contract that would require at the least a plug from Oprah for example…I mean hell even Fox & CNBC give shout outs to (OUR SATELLITE LISTENERS)…… say Sirius for Gods sake….
Keith
@jo
Do you own stock in this company…do you know anything about the underlying points of interest from the last cc….have you been seeing the increase in auto sales….do you know anything about the capabilities of the new satellite. Or are you just having fun….Give some facts that amount to something & you may get your due…& may I ask what the hell are you doing here?
What the hell are you doing here? Oh excuse me your a shorty NAB boy.
As a listener and shareholder, I’ve got several problems with this company.
As a listener, the problem with Sirius’ business is it’s NYC-centric. For years the company has poached talk talent either from the NYC market or who did extremely well in NYC. The on-air DJ’s are the same. If they were big or tested well in NYC, they pay big bucks for them. The rest of the country (who would be just as happy with talent who get paid much less) be damned.
As a shareholder I’m mad because after the merger they fired the majority of the cheaper no-name XM talent, yet they’ve still got every MTV VJ on payroll, they pay an outside consulting firm to do their research legwork (XM did it internally), and they’re operating out of an office complex at Rockefeller Center that they rent month to month rather than using the facility XM owns outright in Washington D.C., and to top it all off they’re still hiring new big-name celebs like there’s no tomorrow. I’ve got news for you guys. Celebs don’t equal increased revenue, and it’s cutting even deeper into their margins.
If this company can’t make small economic changes that make sense, what hope do we have of them actually becomimg profitable and sustainable in the future?
Can’t have it both ways Brian! Exclusive content is useless unless it is recognized as superior and well known. The coasts and Major Cities are where we see the most recognized names..so that is why the company pays Mark Goodman, Martha Quinn etc. etc. instead of Joe Schmuckatelly from Oshkosh to DJ the shows. That name recognition has value…do some research and homework on it. I don’t see where hiring Rosie O’Donnell is hiring new big name celebrities like there is no tomorrow..and she will bring new subscribers with her…she has a loyal following and fan base….even if I am not among them. I don’t see where her contract will be HUGE or excessive….and signing celebs as opposed to obscure no name hosts does make a difference…for you to pretend it doesn’t is too silly to even argue.
Good article ASM. Love your work. Keep it up.
I am a long SIRI holder and yes… Sirius-ly in the hole. While I wait for better times – and I do think it will improve – I don’t expect to get all of my money back (averaged $2.25).
Having said that, until recently SIRI was just a stock to me. I’ve never had, nor cared to have, a subscription with either Sirius or XM. I am currently renting a vehicle that has a full SiriusXM subscription included, and you know what? I love it!! Which brings me to my next question…
Why hadn’t I considered a subscription before? Was the Sirius and former XM advertising/marketing not good enough to swing me? Was I just not paying attention? I consider myself a bit of a techie, and I love my gadgets. Maybe I just love it now because I’m not paying for it?
Either way, when the rental car goes back, I know I will miss my Sirius. Will I miss it enough to become a subscriber as well as a shareholder? Who knows…
I have been a subscriber for at least 10 years, after hearing it in a rental car. Since then I have bought several new cars which offer the three month trials which have induced me into a 3rd and 4th subscription. ATT Universe and Time Warner have great TV offers, but when I have a party everyone raves about the XM music on Dish.
I think most people do not have a clue as to what they gain with XM or Sirius until they have it and compare it to regular radio. Clarity, CD quality sound, no commercials, no signal fade, and you get to hear the music that you’re in the mood for, anywhere in the U.S. Think about it, as we grew up we listened to a radio station for the music and the DJ’s, not a high-priced celebrity.
I bought XM stock after hearing it in that rental car and like the rest of us I continue to lose money on it. After reading the comments in this blog, I see that we are all of the same thought. What is going on within the leadership of XM? They spend money like GM, but they need to down size why rent office space when they don’t have to. Why pay high-priced individuals worth 1/10th of the 100’s of millions they are paid? They need a new business plan that addresses the bottom line to attract and retain new subscribers.
I also wonder if they are just hiring their high-priced celebrities’ friends who are out of work or need a new gig. I am waiting for the leadership to pay them selves a huge bonus. In some ways I think they are just bleeding the company and the investors dry and we are victims of Corporate America’s greed???