Sirius XM (SIRI) received and rejected a takeover bid

Sirius CEO Mel Karmazin is now telling investors that unless the company can raise $175 million pronto -- an unlikely scenario given how bad capital markets are -- it will have to either file for bankruptcy or make a deal with Ergen. Ergen is reportedly still interested in making a deal.

Shares of Sirius will probably get a boost from Ergen's interest, but it still seems unlikely that anything will get done. If Ergen doesn't buy it, the company will end up in bankruptcy, where he would in all probability be able to acquire it at a much lower price, while also shedding some of the company's massive liabilities. Why not wait?

The market for satellite radio has only gotten weaker since the end of last year because fewer new cars sold means fewer satellite radios installed. Karmazin has seen his reputation tarnished by the Sirius-XM debacle, although most of the problems have probably been beyond his control. Yet, by not doing a deal late last year when Ergen first offered, he may have put the final nail in his shareholders' coffins.