By Brandon Matthews
As Sirius XM Radio (SIRI) prepares for its Q3 2009 conference call, most are looking to basic metrics of earnings per share, EBITDA, subscriber acquisition or loss, subscriber churn and acquisition costs. These are typical metrics that have the potential of moving the equity one way or another under normal circumstances. These are not normal circumstances, however. SIRI shares tend to rise into earnings release dates yet the equity seems to be “stuck” at .58 – .60 as Thursday’s earnings call approaches.
Another important data point that tends to move SIRI shares is the Seasonally Adjusted Annual Rate (SAAR) of new car sales. The SAAR rate is now being estimated at 10.5 – 10.6 million, with expectations of improvements in 2010 and 2011 based on auto sales data being released today. Normally, volume spikes in SIRI shares occur due to forward guidance improvements in the auto sales market and the price moves in conjunction with the added demand created for the equity.
Since October 22, 2009 Sirius XM shares have traded on relatively low volume, and continue to do so today as the earnings call approaches and auto sales data shows some improvement.This forced me to wonder if perhaps my own focus on perceived “important data” is not misplaced. I believe I have found the answer while having a look at December 2009 debt obligations of both Sirius and XM.
A problem exists in that Sirius XM Radio has some debt obligations coming due on December 1, 2009. As the repayment or refinancing of these debt obligations has yet to be addressed by Sirius XM Radio, Wall Street is taking a “wait and see” attitude towards the equity.
Sirius XM reported that the company was sitting on over $540 million in cash and equivalents in the second quarter. There can be no doubt that one of the things that Wall Street analysts will be looking for during the current call is the company’s current cash position and any indication from the company that this debt will be retired from cash on hand. This will avoid any fears that may exist regarding dilution, default or new debt being taken on.
There can be no doubt also, that the holders of these debt instruments continue to hold short positions against the equity which will likely be covered with the repayment of this debt. Looking ahead to 2010, Sirius XM Radio has no other debt obligations coming due until 2011, and as such has but one hurdle left to overcome in one of the greatest turnaround stories that Wall Street has ever written.
Position: Long SIRI
Brandon, you might want to change the 227.5M XM notes due in Dec. 2009 to 49M. During the refinancing in March 09, 172M was moved out to 2011 by Bondholders, and in the recent XM refinance of the Liberty debt in June 09, another 179M was paid down…. so now there is only around 49M left of that debt to deal with… I left references in the forum of the specifics…
Any idea on how much debt is due on the 31st? Thank you for your time.
hi cos, you seem to be very knowledgeable. don’t you think SIRI will have to do a RS in the coming years to lower the float even if it goes above a dollar. Aren’t there just too many shares to have the SP increase substantially. Even if they buyback shares someday they will need allot of $ to even make a dent in the float. Thanks in advance
hey bob, you are welcome in the forums to have these types of discussion and more…. see you there where we won’t detract from Brandon’s efforts here…. look forward to the discussion…
Thanks for pointing this out Cos. I found the one exchange that occurred in March, but could not find the one in June. I really do not see this debt as the reason for no pre-CC runnup. The charts are showing that the run will start sometime in the next week or so, if you can take previous moves as guidance for the start of this one. IMO, if the next run does not start tomorrow, it will start on about 11/11.
You do realize that they are reporting earnings this Thursday a.m. 11/4 ?
Your talking about a runnup 1 week after their report ?
Actually, the CC is Nov 5th in the A.M.
and you realize that you have your date wrong, but the day right…. don’t forget to join us at 6 a.m. on Thursday, the 5th… for the live discussion leading up to the call and beyond….
Egis… the XM offering of 525M, 11.5%, that payed off the Liberty Debt closed 6/30/09, EOQ2. The debt balance reported in Q2 is as Brandon stated. The note in the Q2 report states that in early July, 179M from the 525M proceeds will be used to pay a portion of the Dec 09 debt, and a Q3 charge of 3.1M will be taken for this transaction…
We are all well aware of the cc date and time… In fact, we are live blogging it right here on satwaves.com starting at 6am est through the cc and after. We invite everyone to join us!
i kinda remember that too cos as sirius had stated all/most debt gone for next couple of years
All aboard so take that Cramer!!!!!!!!!!!!!
I want to thank the shorts in advance of Thursday morning, as I know you are all going to be taking place in a long line frenetically trying to chase the stock to buy it back in pre-trade thinking to yourselves the entire time ” If I had only bought it back at .59 on Monday or Tuesday! What was I thinking! It was low-volume, and I was following what everyone else was doing, thinking maybe they’d have a disappointing 3Q, and it would drop the way it did after May and after August, and I could get it cheaply…How come I didn’t say to myself CASH-FOR-CLUNKERS and Skydock!!! Now I’m chasing it 30-40% up! What a nightmare…And what you’ll realize is that you’re a pathetic conformist and that you are having a disasterous day with the others…who didn’t THINK ahead of time! Do the math…Can you take the risk in the next two days? And if you think you’ve got Jim Cramer’s back, just remember he had the back of all of those in CIT a few weeks ago when he said to stick with CIT. You are actually alone…Play it safe, or CHASE Thursday am…
I don’t know if the numbers on this particular call will be positive enough to move this stock up in the short term, but your remarks made me chuckle! I do think, however, that if not now, after the 4th quarter will be OUR time! Thanks!
Thanks for the thoughtful post. I am also wondering what effect the surcharge of 2 dollars will have on the income. Has it been in place long enough to reflect the full 7% to 8% it should add to revenues? Also I saw an article concerning the largest changes in short interest in stocks which stated that from 9/15-9/30 shorts in SIRI went from 106M to 89M, a drop of 16%. Coincidentally, this was also when The Street.com was creating a panic with their bogus survey from Audit Integrity about the most likely company to go bankrupt. Lucky timing for those shorts trying to get out without pushing the stock price up. Hmmmm.