Either short sellers don't think a merger between Sirius (NASDAQ: SIRI) and XM Satellite (NASDAQ: XMSR) will happen, or they don't believe that the deal will save the two debt-laden companies. Short interest in Sirius rose 20.2 million shares for the period ending April 15 compared with March 31. Total shares sold short hit 157.9 million. Shares short in XM also pushed up 6.3 million to 22.7 million.
The bets may be smart ones. The delay in approving the deal at the FCC has probably made it less likely that the merger will get the green light. A number of members of Congress have loudly protested that the new company would be a monopoly, They reason that a new entity would eventually raise rates sharply because there will be no competition to dampen prices.
The core problem with the merger may be more profound. Subscriber growth rates at the two companies are slowing. Both also have negative net income. At this point, neither company has predicted when it might make a profit.
The biggest burden that the companies have is their debt. Each has over $1 billion in long-term obligation to repay bonds and loans. In a poor credit environment, it is hard to see that paper getting refinanced at better rates.
A new company, even with some cost savings, could have enough debt to sink it.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-25-2008 @ 10:38AM
Mike said...
But we sure LOVE our XM radio in the new car!
4-25-2008 @ 12:34PM
Inez Charles said...
I think people subscribe to Sirius/XM for one reason: no commercials. Subscription can't be justified for foul language, X-rated topics or the like: you can surely have a dose of that on standard television these days. I can't see XM satellite lasting for more than 2 more years. They have to come up with a better plan to expand the bandwidth for free. Last time I checked, USA was still part of the "free world".
4-25-2008 @ 4:47PM
C Filson said...
The members of congress have their heads where the sun doesn't shine if they think the monopoly would result in rate changes. Its easy to see that seperate companies can do the same with prices, just look at the gasoline companies. They've pretty much proven that anybody can have a so called "gentlemans agreement" and put the price of a product where ever their wallet wants it. Maybe the term Gentlemans Agreement is too loose, I believe "axis of evils" is a better term!
4-25-2008 @ 6:16PM
Bill Benson said...
Don't buy this nonsense. The merger is about to be approved any day now. The stocks have run up this week in expectation of this. The big boy's want to buy your shares on the cheap, because they are headed much higher. Satellite radio is the future of radio. Anyone who has it knows what a great medium it is, well worth the meager pennies per month to subscribe.
4-25-2008 @ 7:56PM
Plowboy said...
Has Doug McIntyre ever said anything positive about satrad? ... not that I can remember. Even Satan takes a day off now and then. Not Doug.... pounding it daily!