Short sellers giving up on Sirius (SIRI)

Wall Street may believe that whether there is a deal to merge with XM Satellite (NASDAQ: XMSR) or not, Sirius (NASDAQ: SIRI) shares have fallen as far as they are going to. How much more bad news can the company take? Recently, Goldman Sachs said a combined company would need to raise as much as $1 billion for operating costs. Each of the companies already has long-term debt of well over $1 billion.

Subscription growth at Sirius is slowing and it still does not make an operating profit. The market has been concerned that HD radio, new consumer electronics devices, and mult-media phones all mean new competition for the satellite radio operator.

But the short interest in Sirius dropped 18 million shares to 170.4 million, the second largest drop for any company on Nasdaq during the May 15 period.

Trading just above $2.50, SIRI shares may have found a permanent bottom. Its market cap is under $4 billion, a fraction of what it was two years ago. Is there anything left to move it down a lot more? Probably not.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.