Approve a Massive Stock Dilution? Surely, You Can’t Be Serious…I Am Sirius, and Stop Calling Me Shirley.
by John Paczkowski
Posted on December 19, 2008 at 9:04 AM PT
David Faber: The stock price is very low.
Sirius XM CEO Mel Karmazin: It sucks.”
– Mel Karmazin states the obvious in a July 2008 interview with CNBC
At Sirius XM’s (SIRI) annual meeting Thursday, shareholders approved a reverse stock split plan that empowers the board to split common Sirius shares by a 1-for-10 to 1-for-50 ratio by end of 2009. They also approved the issuance of up to 3.5 billion new shares. Should Sirius need to, it can now effect a reverse split that will raise its stock price above the $1 necessary to avoid delisting and sell new shares to meet the almost $1 billion in loan repayments it faces next year.
Sounds like a reasonable plan on the face of things. Trouble is Sirius is trading at around $.14. And at that anemic price, proceeds from a sale of 3.5 billion new shares would amount to just $490 million–less than half the amount of the debt coming due next year. Sirius clearly hopes it won’t have to issue all 3.5 billion shares the vote approved. To do so would dilute existing holdings and drag its share price still deeper into the mud. It would, however, keep the company in business–in the short term. Sirius’s long-term viability is another problem entirely, one that’s not easily solved. With an almost $5 billion loss in its last quarter, subscriber growth plateauing, and the U.S. auto industry–a major source of new Sirius sales–in decline, the satellite radio provider really needs to do something to shore up its ailing business. And its plans to drive subscriber growth, outlined in the second slide below, may not be enough to do it.
PREVIOUSLY:
- Your Report Card Is Your Stock Price? Guess Sirius Is Making Straight $.13’s…
- Save Sirius Coalition Having Trouble Saving Sirius
- Karmazin: Ask Not What Sirius Can Do for You; Ask What You Can Do for Sirius
- Trade You 77 shares of SIRI for 1 Month of “Sirius Everything”
- Sirius CEO: This Sucks
Comments
So in other words John. By your reasoning; Citicorp, JPMorgan, USB, AIG, GS, and MS to name a few, who reported billions of losses this year,so far, should also do a reverse stock split and sell more shares! It’s funny how everyone jumps on the bandwagon to bash a company.
Posted by Jeff Stevens at December 19th, 2008 at 9:26 amCNBC, Motley Fool and Digital Daily, never ever mention Short Sellers. Why is that?
Lets now talk about global warming and impact that newspapers like the Wall Street Journal have on the destruction of mother earth!
You guys are hot today!
Why wouldn’t it be better to just give away the service (still sell the radios of course) and pay for the service with ads?
I’m not the target audience by any means, but I’d almost certainly have one installed in my car if there was no monthly fee.
Posted by Mac Beach at December 19th, 2008 at 5:20 pm