Sirius XM: The Beginning of the End or the End of the Beginning?
by John Paczkowski
Posted on February 5, 2009 at 7:30 AM PT
Sirius XM Satellite Radio is having its best day at market in recent memory thanks to a report claiming EchoStar has been buying up its maturing debt in preparation for an attempt to gain control of the company. Shares in Sirius are up more than 28 percent at 18 cents on The Wall Street Journal’s claim that EchoStar recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17.
Clearly, EchoStar (SATS) is not so addled as to think it can make money on that debt. So the company is either making an investment in Sirius (SIRI) with an eye toward some sort of strategic future arrangement (the two companies have worked together in the past) or it’s amassing debt as a means of taking control of Sirius. If Echostar were to buy up more than 50 percent of the struggling satellite radio operator, it could force Sirius into bankruptcy, swap its debt for equity and take control of the company. The first scenario is certainly plausible, but the second seems far more likely.
“The issue, I think, is that [Sirius] is potentially a very valuable franchise with a unique quasi-monopoly position in the automobile,” said Sanford Bernstein analyst Craig Moffett. “The company is starved of capital but not starved of potential growth. An investor with sufficiently deep pockets can buy what is potentially a very attractive franchise on the cheap.”
Comments
There is a hole in your article. The FCC would never let Echostar own SIRIUS XM! The merger between SIRIUS XM almost did not happen. There is no way our government would ever allow it.
Posted by Anthony Davis at February 5th, 2009 at 9:01 amFor some reason you missed the WSJ article on 2/2/09 by Sarah McBride where Sirius (Mel)
“is talking to possible investors about financing options.”
It should also be remembered that the former SIRI CEO Joe Clayton is a new director of Echostar.
And you probably also didn’t know that SIRI has a limited video service to auto’s.
And you probably forgot about this years CES where AT&T announced CruiseCast.
(Now if we only had a wedding
tie-in we could insert a pic from Working Girl)
And no mention, once again, of Goldman Sachs who owns Feb Debt and has shorted SIRI to death.
(Or is that who contacted you?
Hmmmmmm)
But I guess you have already come to the conclusion with your vast financial expertise that SIRI will go bankrupt.
Posted by Jeff Stevens at February 5th, 2009 at 11:12 amJeff – He probably didn’t pay for the WSJ subscription to read the rest of the article.
Anthony – I totally agree about the FCC not letting this happen, or at least delaying the process long enough for Sirius XM to run out of options.
Here is my take on Satellite Radio:
http://thegrenade.wordpress.co.....-grounded/
Posted by Mike Ielpi at February 5th, 2009 at 8:00 pm