By Brandon Matthews
Satwaves Radio was privileged to interview Robert S. Bacarella; President, Chairman, Cheif Executive Officer and Portfolio Manager of Monetta Mutual Funds. Bacarella holds a substantial position in Sirius XM Radio (NASDAQ: SIRI) in two of his funds, including The Young Investors Fund which was awarded a 5 Star rating by Morningstar yesterday.
Bacarella explained his investment philosophy that has resulted in his fund’s out-performance and exceptional returns to date. The in-depth interview included discussions that ranged from Sirius XM fundamental and technical analysis, to discussions about delisting worries and reverse splits. From a technical standpoint, he explained that one of the most important indicators he looks at is the movement of a stock on higher than average volume, explaining a rising stock indicates that more people want to own a particular stock than sell. This philosophy alerted him to SIRI in March of 2009, and the returns speak for themselves. He then went into detail regarding the recent accumulation pattern that Sirius has begun to break out from, which he suggests may continue higher.
From a fundamental standpoint, Bacarella detailed how Sirius XM’s concrete numbers fit his model. He referred to Sirius XM as “Best of Breed” in the radio industry, and was most impressed by the company’s third quarter earnings results. He noted that Sirius XM Radio is establishing a consistent record of continuing to improve quarter after quarter, and will continue to hold Sirius XM shares as long as that trend continues.
The issue of a reverse split took center stage throughout the interview. Bacarrella explained that the main issue for Sirius XM is assuring its investors, both retail and institutional, that it will not be delisted. Bacarella is adamant that a reverse split is meaningless to the fundamentals of the company and gives great detail as to why such a move would result in more institutional interest and ownership. He explains that the current price is an obstacle to institutional money coming into SIRI shares and feels strongly that institutional “sponsorship” is needed to raise the stock price in a meaningful way. Stressing that fears of retail investors are unwarranted, The 5 STAR award winner is adamant that he, as well as most other money managers, will use any potential dips to add to their positions.
Position: Long SIRI
There is no doubt that the fundamentals have changed and that SXM will become a cash cow. However, it doesn’t surprise me that a fund manager would endorse a R/S since at current prices there is little downside risk for shorting purposes. As one of the previous guests said, I think David Banks, the R/S is necessary so that SIRI can become a “Real” stock. One that can be “Shorted”. Also, if one would take time to read the annual report filings from last year regarding a R/S you will find that any R/S also provides authorization for the company to issue a “huge” amount of new common shares that if management chooses could be used to pay off debt…a good thing, but not good for current shareholders whose shares would be “diluted” again. No doubt the company will thrive…the question is how long will it take the sp to recover from institutional shorting and further dilution post R/S?
There is not a company on planet that does not have more shares authorized than issued. You are making fear based dilution assumptions based on no facts here, and trying to justify an unjustifiable position against a reverse split.
If you are concerned about a reverse split, as our guest said, you should not be in the stock. It’s going to happen. The only question is when..
Brandon, You are overreacting. I am certain you have read the filings and you know this is a substantial risk that folks need to be aware… The authorization for new shares far exceeds what is needed for general corporate purposes. Look, I am Long SXM because I am confident the subscriber growth has returned and will only get better as the economy recovers. However, I am also a realist and know that the sp will take a lot longer to recover from any potential dilution. Everyone needs to have “all” the “facts” and then make their own decisions on how decisions by the company will affect the SP near and long term…
You are creating irrational fear..the idea of authorized shares being a grave concern is intellectually immature. Honestly, I feel embarrassed for you for taking such a position. I’m sure a lot of people had a great laugh this morning at your expense.
Brandon, I must admit that I am disappointed with that response…I thought you were more professional then that? Just read the filings and do whatever…True Longs have nothing to fear…
Brandon, there is no reason to be so defensive and overreact to factual comments of true siri fans. It would be unwise to rule out an option, although very unlikely, of further issuance of siri shares to pay off their debt.
Mr. Bacarella’s interview yesterday was the best I have heard so far on satwaves. His r/s rationale was very persuasive and argumentative. I would say that he convinced me that now is the time. The ratio is still extremely important. I think it should be not higher than 10 to 1. I am still not concerned that siri will ever be delisted because MK and the company know what they are doing and will never allow this. I keep wondering why they do not go ahead and do it now. They must be smart guys with tremendous internal and external support. Do they have something up their sleeve that may surprise or rather disappoint us? Or is this business as usual?
I do not believe that we will have to wait too much longer for r/s news. It would be prudent to surmise that an announcement will be made within the next four weeks or so.
To White Rose, V.I. et al:
Regardless of the reverse split, you do realize that Sirius already HAS the authorization to dilute you by 1 billion shares, correct? It is the authorization that we gave to the company at last year’s Annual Shareholder’s Meeting.
Brandon no need to get into name calling…you are better then that…just stick to the facts…
You are using a projected fantasy scenario. This information has been public for a year. Is this new? No. Do you think you made some magical discovery? You didnt. You are fear mongering based on a lack of understanding of basic corporate structure…
Look at MSFT
Shares Outstanding5: 8.88B
Float: 7.75B
You always leave room for expansion..You are really humiliating yourself now
Who is humiliating themselves? So disappointing…when one cannot dispute the “facts” they resort to baseless personal attacks…I’m done…the facts are what they are.
I would love SIRI to become a cash cow … I’ve got a few shares at $2.30 and have been really tempted to just bail. Why so confident on profitability?
Let me say this a few times so that maybe retail investors finally get it. A REVERSE SPLIT IS GOOD FOR THIS COMPANY IN THE LONG TERM. A REVERSE SPLIT IS GOOD FOR THIS COMPANY IN THE LONG TERM. A REVERSE SPLIT IS GOOD FOR THIS COMPANY IN THE LONG TERM. Whoever doesn’t agree with a reverse split, just look into their motive on why they don’t agree. Whether this stock is 1.00 or 2.00, we WANT a reverse split to get this stock over 5.00.
Then could someone explain to me why Karmazin is against a reverse split?
Who said Mel was against it? Mel is going to do it. It is a matter of WHEN. He is lining up all the ducks in a row right now. Once 4th quarter numbers are out, it will happen.
Mel is lining up his ducks because he has to based on the SP and the likelihood of a forced R/S to remain listed. Based on his comments that he is against the R/S for any other reason, it’s the prudent thing for any CEO to do.
I believe that Mel will eventually do a reverse split and that the reason why he hasn’t done so is because he needed more time to show investors that Sirius XM has truly turned the leaf. Without instiutional help, he knows that the stock cannot orginically go over $5.00. Mel knows that a reverse split to get the share price over $5.00 will be in the best interest of the shareholders in the long term. What is in the best interest of the shareholders is the prudent thing for any CEO to do.
Do you really think that this stock should be worth $.6752 cents currently?
R/S may happen…forced or not…and once the market recognizes all the positives an R/S won’t matter…but, I take Mel at his word and think he will do whatever to avoid.. The current SP is rediculous, but why not give Brandon’s catapult a chance to work it’s magic…still think it can grow organically…anyway we will all know soon enough…
Mel did say he is against it…
http://seekingalpha.com/article/175897-sirius-xm-s-karmazin-speaks-out-against-reverse-split
“Karmazin makes clear that he is vehemently opposed to a reverse stock split and will only perform a reverse split as a last resort. “
The last resort is here….they cannot wait until after Q4 results in mid feb, because the stock will lose support after that…
that means they will have to do it before earnings, and the announcement will come in 2-3 weeks…
do you think this stock can get over a dollar in 2-3 weeks…not gonna happen…
On Cavuto, Mel stated he does not see the reason for a RS. Mel also stated last year that a RS would be used for delisting purposes. I don’t think any CEO wants to do a RS on their company. CEO’s rather have the stock price grow naturally. Mel also has several million shares that will be RSed. Of course he does not want to do it.
Brandon, I agree – it will happen. Are you in LV at the CES, curious on what’s going on out there.
Once again the Reverse Split topic is a HOT topic.
First let me say that Mel will not let Sirius XM be delisted. PERIOD.
Second, if a RS happens OR not, it is out of our control. PERIOD.
When discussing the RS, it it always center stage, with no other options being discussed. That is disappointing. The share buyback option is NEVER discussed with a guest to get their take on the buyback approach. Let the guest give their point of view. It is always dismissed as NOT POSSIBLE (covenants). Mel has talked about FCF, and it’s uses, several times. Brandon wrote about it in an article on November 16, 2009.
Discussing ALL options is just good journalism. We at Satwaves quickly downplay theories that do not fit the mold.
Note: I am long Sirius XM and have NO fear about a RS(full disclosure)
Mr. Sirius,
Debt covenants prevent Sirius XM from doing a buyback at this time. PERIOD.
It’s not an option that the company can use at this time. Even if they could, would that get the stock over a dollar for 10 consecutive trading days by March 15th? Getting the stock over a dollar for 10 consecutive trading days by March 15th is the issue at hand. A buyback isn’t discussed because it’s not a course of action that the company can utilize at this time. I believe that it is something that the company can do in the future, but only after reducing their debt load. Mel’s previous comments were about what companies can do with FCF in a general sense and I believe he was insinuating that Sirius XM could do that in the future. Again, there is no way that the company can do a share buyback at this time, unless maybe the tooth fairy leaves them a few billion dollars under their pillow…..
Demian, please comment on the yesterday’s filing that changes the debt agreement from a security agreement to a collateral agreement. Does that not remove these covenants, at least for this debt?
A Wynter: It may perhaps change the covenant for that particular debt agreement (im not positive), but the 2015 debt that was just issued in August has the exact same covenants.
I agree Newman but they are moving to eliminate these restrictions whenever possible. After you do your DD, I believe you will find that they are no longer restricted under the collateral agreement ref. the 2013 debt. Another step to ensure control of their company…look for this to continue…just saying…
Brandon, how can you dismiss all views that differ to yours concerning a r/S. You accuse those against a r/s as living in a “fantasy” world as if you KNOW what will happen. You don’t. The fact that you do, is arrogance. And there is a fine line between Arrogance and fantasy my friend.
You act as if a r/s is the only answer to manipulation. And act as if it will magically stop once a r/s is done. You scoff at the mere notion that Sirius could then experience a massive short attack. Or you dismiss any negatives and call it a possible temporary pullback.
Can you be so sure? This is not fear mongering. This is a potential and very real possibility for shareholders.
I would argue that knowing Sirius’s past, it is YOU that are living in a fantasy by saying a r/s is all good and nothing bad will happen.
The very real truth is that a r/s could have devastating for many true longs who have held for years, even the ones who were able to average down.
You wave off their fears like they don’t matter. ANd you dare to call THEM fear mongers? These are good honest people with concerns.
You pass yourself off as this holier than thou figure, but whose to say that YOU aren’t the fear monger? A fear monger using reverse psychology, by saying the thing people are fearful of is a GOOD thing.
What if you’re wrong pal? Will you own up to it? Will you admit it? Will you apologize to your readers? Say you’re sorry for never entertaining opposing view points?
I’m not asking anyone to take my word for anything. I have provided you with live interviews with every analyst that covers sirius xm and 2 of sirius xm’s top institutional holders. Apparently, a few retail investors such as yourself seem to think you know more.
So sell…a reverse split will happen…get out now…it’s really of no concern to me anymore. I’ve provided the facts as people such as yourself provide the fear.
Sell..
So that’s your answer? SELL. Do you realize how condescending that is? Why won’t you even entertain the possibilities that a r/s will cause pain to alot of people? Or that it’s not the ONLY path Sirius can take? Because it’s not. There are other paths. You REFUSE to even discuss a share buy back plan, even tho Mel mentioned numerous times that this was the goal of companies that turn a profit. You just say, “OH Mel didn’t mean that in relationship to Sirius!” Um…LIKE YOU KNOW what Mel thinks? You REFUSE to even discuss or talk about Mel getting a possible exemption, even tho Mel himself has said on camera many times that he is AGGRESSIVELY pursuing this. Nor will you discuss the possibility of an extension, merely saying that it would only delay the delisting(as if Sirius could NEVER get above a buck by the summer!)
Bottom line is that you have such a hard on for a R/S that you have blinders on. Admit it.
And just because you’ve had some analysts and hedge fund guys on who support your love for a r/s doesn’t mean anything…..it’s still just ONE side of the story.
Until you talk about ALL possibilities, your site is very one sided.
yes…I am very one sided….the correct side…
I’m a novice investor who bought for pennies on a gut feeling that Sirius would somehow climb out of its hole. So far, so good. But can someone explain to me how my 50,000 shares turning into 5,000 shares is good for my long term investment? Don’t beat me up. This is not sarcasm. I’m guessing there’s something I don’t understand.
50,000 X .68 = 34,000 dollars
becomes
5000 X 6.80 = 34,000 dollars
no difference
Hi Brandon. I get that part, but I was thinking in the long run, we’d hit that and more anyway. I think we’d both like 50,000 X 6.80 better. Was I unrealistic right from the get go? Do you think I set my sights too high? Stupid question…
Very succinct Brandon… Same pony either way
yeah, but at .68 cents there is very low risk of the stock going down much on a short attack and your $34,000 investment is safe
But the risk of a short attack after a r/s is great. So shorting it from $6.80 to $3 would instantly cut your $34,000 down to $15,000 so forget about making a profit let alone breaking even!
better to let sirius get to above a buck on its own. You’ll not only make a profit, but have a good chance to DOUBLE!
Aint no way youll ever come close to doubling to $13.60 AFTER a r/s, i dont care WHAT Brandon tells you.
Brandon, you should finish you math. 5000 @ 6.80 vs 50000 @ 0.68 is the same, no problem there; however, I would rather start with 50000 @ 0.68 on a day when the stock rises 0.02 than 5000 @ 6.80 on the same day ($35K vs $34.1K). After an RS the stock would have to rises in larger chunks to make money!
why u r so skeptical we cant get 1 organically?
if u r so sure, although longs, u can sell all ur positions now, wait for the rs and then enter back again at a “lower” price to stay long again..
doesnt make sense?
the 2 people from that don’t see a r/s as good are mel and frear? who do we believe, co. people or analysts?? i personally think the stock will do well either way in the next 5 to 10 years.
for those who are believe so strongly we will see $1 before Nasdaq time runs out or for those who don’t want a r/s, please start putting your buy orders in at .90, then when it hits $1 you made at least 10%.
All these people who don’t want a reverse split need to be buying!
funny guy….
even better buy now and sell 1
Brandon,
You wrote an article awhile back saying it isn’t far fetched to think SIRI could increase it’s subs by 1.5 million customers in q4. Are you now thinking it’s impossible for a giant improvement? Or, do you think that even if they released a bombshell like that it could not get over a dollar quickly (and for 10 days) to satisfy the delisting requirement? Thanks.
Good Afternoon Brandon,
Whether the stock price rises above $1.00 on its own or we get a reverse split, I’m over it.
What I am very confident about is that Mel and his team will NEVER let SIRI get delisted…
Brandon: would you happen to know the “drop-dead” date that the R/S MUST be executed to avoid delisting?
Thank you!
My issue with Brandon’s position on a r/s is not that he’s for it. Of that opinion I simply disagree. But what I find infuriating is that he uses his bully pulpit to say with ABSOLUTE CERTAINTY that it WILL happen and there is nothing anyone can do about it. To me, THAT is fear mongering. You are posting article after article that this is a FACT…and will happen for sure wether or not they get over a $1. He is using fear plain and simple. It’s like doing the hedge funds bidding to scare people out of their shares. In fact, the streetdotcom and MF have stopped posting about r/s fears, because Brandon is doing their job for them.
THIS IS MY OPINION. Censorship is not cool Brandon. I support your right to your opinion, but what you are doing is silencing debate and excluding ANY talk about other scenarios. That’d be like me saying with ABSOLUTE CERTAINTY that a R/S will NOT happen.
Brandon & Demian, great show last night…IMO the show needs to be scheduled for 1.5 hours at least when you have a guess on. I saw above normal guests in the chat area and also callers on hold. The radio show needs to have guests, callers, and comments from Brandon, Demian, and Newman. As good as the show was, I feel short changed from the usual format. I hope you consider extending the radio show time. Thank you
Hey Brandon,
Why is not possible that SIRI/XM will reduced the float by 10x and then not hit us retails with big dilution again ? It would be awfully tempting to print some shares to payoff debt. Maybe I am naive , but I really do believe that SIRI can do an organic turnaround. Isn’t it possible that siri can get into FCF , payoff it’s debt and buyback shares after satisfying their debts.
I believe in the Co. and have been an investor for a couple of years now. I managed to avg down to .50 pps and am in the black. I see now reason why siri cannot grow to 22-25 million subs and be very successful in 3-5 years. I know SIRI cannot buy back currently because of covenants in their bond offerings , but it will never be possible? I am willing to hang in for a long time , believe strongly in buying and holding. IMHO the pioneer/pandora is a joke($1200) and not a true threat , you could buy 2 satrads w/lifetime subs for that money.
Sorry. R/V = R/S
Brandon, I am all in at around .50 why do I keep reading post that say. I was in at over $1 and I will never get that money back or the R/S should only apply to those that invested in the last 2 years?
Just curious if there is anything at the CES show worth mentioning? Thanx in advance
How is the stock going to go over 1.00 or 5.00 dollars? Will the demand come from retail investors? Retail investors do NOT have that great of a pull. There are a lot of institutions wanting in on this stock, but they cannot. There has been many analysts already circulating that Sirius XM is a strong buy. Why are retailers so afriad of a reverse split? I don’t get it…
We are all entitled to our own opinions but not our own facts:
1. RS is very, very probable. (Ok, this is opinion!)
2. RS will NOT increase short positions. A company loosing money will.
3. RS will bring in new buyers for reasons we all discussed.
4. If the company does poorly, whether the stock is at $0.69 or $6.90 … it will still get shorted and sold.
Even if siri pulls a golden radio out of its’ ass and the stock goes to $2 .. they should STILL RS to bring in the institutions!
K
you guys are all dumbasses I am so tired of reading this drivel about a reverse split for or against. The only thing that matters is market cap. A reverse split will have zero impact on market cap and your investment will be the same on a relative basis.
in time we might have…but we do not have time…we have a deadline
in time we might have…but we do not have time…we have a deadline
Brandon, I learn something every time I read your pieces, so please take no disrespect but I see very different ponies here if Sirius can reach its deserved SP without a R/S. What if Mel announces something soon enough and large enough that it eliminates the delisting threat? How far away is the ability of a buyback? I can see a R/V benefiting those aged investors who are trying to retake lost ground but my investment takes on life based on the number of shares not a 10-1 equivalent. No reverse split, please… I think.
What do you think is a “deserved” price? The market values sirius at .67. Last I heard, Sirius was trading at 18 X forward earnings…one of the highest valued if not the highest valued stocks in its class..
Nearly doubling that is just not possible under current conditions.
Sirius/Xm is projected to grow their eps by 90%. High growth rate stocks get big forward earnings rates !
Yeah, but heres the thing Brandon… a r/s would NOT change your “last you heard” 18X earnings Sirius’s value at ALL. So if you think it’s over valued under current conditions, a r/s is not going to change that.
The ONLY thing that will change Sirius’s value is it improving it’s fundamentals and showing a profit.
As it does so, it can pay down it’s debt and buy back shares.
It needs time to grow and do these things. To prove to wall street that it’s not a fluke.
You wrongly focus on the March “delisting” deadline. But doing a r/s before the above things I wrote are PROVEN will only CONTINUE the manipulation. Only worse is that the shorts will have room to short the HELL out of Sirius then. Which is BAD for long time investors, and WHY Mel said he will do everything in his power to avoid it….including fighting for an exemption or an extension.
All we need is time. Why can’t you see this? Why can you ONLY see the future thru a r/s colored glasses and not entertain the BENEFIT of avoiding it?
Sirius will prove itself in EITHER scenario over time, so why just focus on the r/s version?
You say Sirius can’t double now. But according to your logic, that means that Sirius can’t double after a r/s either. The r/s does NOTHING to help sirius’s valuation. In fact, if it is based on CURRENT situation, a r/s NOW all but ensures that it will be shorted, THUS keeping true longs MUCH farther away from breaking even or making a profit than if the r/s never happened. SO WHY DO IT???
WHY not wait???
Forget the exemption, just the EXTENSION will give us until JUNE. That is two more quarters after what looks to be a PROFITABLE 4Q to PROVE itself and get over a buck.
JUST that fact alone, coupled with the knowledge that Sirius DIDN’T NEED a r/s to “cheat” itself over a buck will BRING SO MUCH MORE positive attention from buyers than a r/s EVER could.
There, I said my peace. I wish you could at least SEE the other side of the coin. But it seems you have your r/s blinders on and can’t see ANY other scenario.
time is up…why cant you see this?
I agree 100% bigtao. I’d rather see a few more quarters and they will get over $1.00, especially with the 4Q that is supposed to blow the doors off #’s. June extension should be enough time to get us there. The whole argument of not being able to move a stock because of 6.5 billion shares is nonsense because it’s % move that is important. Reversing it doesn’t change anything except allowing institutions to invest. the manipulation and attempts at shorting will continue. I think getting over $ 1.00 on its own will send a strong signal & I wouldn’t mind so much a 1:5 reverse after they are successful being over a buck for the 10 trading days.