Sirius XM Keeps Tanking: Now 14 Cents (SIRI)
Why? No Sirius-specific news, again, but more general doom and gloom, and bad news from the auto industry, where Sirius gets most of its new subscribers.
At least one financial analyst is now even comfortable being quoted using the "B" word -- bankruptcy.
CNNMoney: "The outlook for Sirius XM has grown increasingly worrisome and at the current time looks bleak," said Frederick Moran, an analyst with Stanford Group. "At this point, you have to question whether Sirius XM will survive 2009 in its current structure. There is a likelihood that it could enter bankruptcy."
As my colleague Henry Blodget said Tuesday, yes, Sirius could go to zero. (We've updated the numbers as Sirius' market cap has had $200 million wiped off in the last two days.)
Mel Karmazin's company currently has an equity market capitalization (value of the stock) of $455 million. It also $360 million of cash and $3.3 billion of debt, so its "enterprise value"--the implied value of the business itself--is about $3.5 billion. The only thing that has to happen for Sirius (SIRI) stock to go to zero is for the market to conclude that the company is worth less than $3 billion. This would wipe out the company's stock value, leaving the company in the hands of the debt-holders.
Why might the market soon conclude that Sirius is worth less than $3 billion? Because it's running out of cash. In the first 9 months of this year, Sirius had negative free cash flow (cash from operations - capex) of $300 million. $360 million of cash won't last long at that burn rate.
Sirius's stock is now low enough that it will be hard to raise capital by selling stock, and we can't imagine who would be willing to lend the company money right now. That means the company's cash cushion is likely to get dangerously low, perhaps forcing Sirius into a highly dilutive equity deal that will put additional pressure on the stock. So it's not hard to see how the stock could go to zero (or close to it).
See Also:
Yes, Sirius XM Can Certainly Go To Zero
Sirius XM Hits New Low: 20 Cents
Sirius XM: Our Christmas Will Suck
Now He Tells Us: Sirius XM Sees Slower Growth Ahead
There is really one problem with Sirius - the audio quality on the music channels. There is simply insufficient bandwidth. The programming is great.
There is nothing quite like Playboy Radio when stuck in traffic, for example. The comedy channels are also fun.
On the other hand, I have been able to enjoy my premium subscription to http://www.di.fm a lot more lately as my cell phone based Internet access continues to improve.
Therein lies a second business model for SIRI - Internet radio, which they are exploiting.
What annoys me, a lifetime subscriber, is that I would have to pay an additional $3/mo to get the 128kbps feed. On the other hand, my current www.di.fm subscription is $6/mo, so I may yet pay an additional $3/mo. I am undecided at the moment.
I think that in the future SIRI will become more recognized as an Internet radio destination in addition to being a satellite radio player.
Feel bad for te guys who paid for the lifetie sub.
i sure hope it doesn't hit my car.
and that's what you get for investing with a sleazy guy like M*L.
-- Mel Karmazin 2003
"BUY SIRI STOCK, BUY SIRI STOCK, BUY SIRI STOCK"
-- Mel Karmazin on Mad Money
Nobody wants to but Sirius + Best of XM or some such crap. They want one library of channels to pick and choose. Make pricing simple, lock people in on contracts with cheap hardware, and start firing people you slow-moving twit!
I am a subscriber and love it - I have not listened to regular radio in years. I would say they do have some re-thinking to do. I agree the additional fee for 128 is ridiculous - also dont like that after the merger they want to charge more for the "best of XM" - milking more pennies from existing customers is a bad plan - they need to focus on making it a value product and gaining more subscribers and keeping existing ones happy by offering better programming without more costs.
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