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Federal OEM Bailout Looks Positive for Sirius XM

by: Tyler Savery August 26, 2008 | about stocks: SIRI    

Tyler Savery

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Citi analyst Tony Wible sees a possible Federal Government bailout of the big three auto makers as offering a brighter outlook for Sirius XM Radio (SIRI). In a report issued Monday, Wible noted that domestic auto makers may be seeking to tap up to $50 billion in loans from the federal government at a fixed rate of 4.5% with payments deferred for up to five years.

While details of such a bailout are not concrete, the automakers could potentially use the funds to enhance fuel consumption averages or retool existing plants. If the funds help automakers along certain paths, it frees up more money to be aggressive on the sales level, which in turn would benefit SDARS.

Satellite radio has been increasing in installations for a few years now, and penetration is expected to continue to grow. More sales in the OEM channel will translate to more subscribes. Wible also notes a sentiment that I have been looking at for quite some time, which is GM (GM) having a smaller share of the overall market, which is also friendly to Sirius XM, as the GM revenue share agreement is the most expensive. Anything that helps the OEM channel stabilize is good for satellite radio.

Wible maintains a BUY on SIRI.

Position - Long SIRI

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This article has 15 comments:

  •  
    Aug 26 02:08 AM
    YES, As long as the big auto stays in business whether or not bailout we will all be reaping the benefits of more and more autos being equiped with satellite compatible radios. GM and Ford will survive and long live satellite radio. Better get on the train to rich's now while it's cheap. Sirius/xm that is. $$$$$$$$$$$$$$ will be made even with the coverts and all the shorting. Great company, great product, and great management make for an interesting future for satellite radio.
    Reply
  •  
    Aug 26 05:57 AM
    Even if the big 3 don't het a bailout, and go ouy of business even, I don't think it will effect Sirius XM. Why? Because demand will shift to other car makers. The annual demand for cars can be considered a constant, and any decrease in one brand will merely increase demand in another. If ExxonMobil goes out of business, people will merely buy more Shell, Texaco, HP, etc. I know it may sound like I'm crazy, but it's just simple and primal supply and demand theory. So things are looking bright for us either way.

    I had 2500 shares of XM averaged at 12 and change, resulting in 11,500 shares of Siri XM, which resulted in the huge manipulation-fueled drop in price, which resulted in a hefty $13,000 margin call. So I took care of the margin call because I KNOW what this stock will be worth as little as six months from now. I don't blame Cramer because I bought last September before I even knew who Cramer was. I don't blame Mel because Mel was the victim of a credit crunch, and he had to make the last 500 mil of financing on undesirable terms in order to prevent the NAB to file a stay of execution blocking the merger. I would have done EXACTLY the same thing given the two alternatives. And remember: Mel was able to procure 1.25 billion on short notice in unfriendly credit markets. What does that tell you about the perception that Wall Street has on the future of this company? I don't blame Tyler because I found out about this blog only about 4 months ago. Anyone who buys a stock merely on the advice of others without doing a little due diligence has only himself to blame.

    I DO however blame the FCC for their laisse faire attitude, ineptitude, cronyism, corruption, and self-serving agenda. I just wish there was some sort of legal action we could all take. And I have a question for some of you more educated folks out there...I am thinking of filing a lawsuit against Golman Sachs because they put a sell rating on Sirius while at the same time going long on Sirius and increasing their positions. Is there a case? They did cause me damage and there is a conflict of interest on their part. Some feedback will be appreciated.

    And to all longs, remember what Hannibal Lechter said in Silence of the Lambs..."All good things to those who WAIT."
    Reply
  •  
    Aug 26 05:59 AM
    Couple of typos in the first paragraph. That's BP, not Hewlett Packard!
    Reply
  •  
    Aug 26 06:15 AM
    One thing that DOES have me perplexed is that Siri XM is not marketing the NFL when it's right around the corner. Can anyone chime in on this? Tyler, what is your take on this. Are they waiting til the last minute?
    Reply
  •  
    Aug 26 08:10 AM
    To all that hold siri or want to buy. Don't expect any big pop near term. Spend only what you can afford to let ride for 3-5 years and forget about it. None of this news will have any effect on the stock. Earnings is the key. By the way nobody care what your average price is.
    Reply
  •  
    Aug 26 09:03 AM
    Truck, first of all speak for yourself, and if you do, I don't give a rat's ass what you think. I gave my position to demonstrate that I'm losing my ass like everyone else, yet I'm not worried. It's a showing for people who are desperate and bitter that there is light at the end of the tunnel.

    Now ho het back in your truck and drive your ass off so you can pay for your gas.
    Reply
  •  
    Aug 26 02:43 PM
    Gekko13,

    I'm going to have to agree with Truck-driver-tom1 on this one. A simple, 'I bought at an average price of $12 and am still long because of x, y & z' would have sufficed. Nobody needs to know your actual cash position. And then all of the credibility you gained from your first thoughtful post(despite describing your investment value) is completely lost with your follow-up attack on tom1.

    Keep it clean and keep it fair guys.

    And for the record, I am long SIRI as well, at a dollar cost average well above $5, but am not comfortable adding to that position at these levels until I see 1) what the American economy will do in the next 6-12 months, 2) how the joint company combines and begins to realize cost savings 3) how consumers view the new company and their new line(hopefully) of receivers and 4) whether there is a backlog of consumers waiting on the sidelines for this merger to pan out before subscribing (like I am). I have 1 old sportster, and another that died on me...and I'm waiting for the dust to settle before replacing my receiver(s).
    Reply
  •  
    Aug 26 02:56 PM
    The success of your investment hinges on a federal bailout of your largest revenue driver? Now there's a reason to buy the stock of an unprofitable company...not!
    Reply
  •  
    Aug 26 02:57 PM
    The Vicar warned all of you about the price slump. How long are you willing to wait for the rally that never happens?
    Reply
  •  
    Aug 26 03:36 PM
    Vicar, thank you for careing.
    Reply
  •  
    Aug 26 09:32 PM
    The Vicar of Value...
    How many shares of Sirius are you shorting? Since the stock has already bottomed, when are you going to close your position? I assume thats why you comment on here. Truck guy, I like to know what peoples buy ins are for, so hush. Why are you so mean? Did reading his price average offend you? Wow, your touchy? Do you wear a womans dress while you drive your truck? Check your tampon, and stay off the big boy boards, ok?
    Now to the adults in here. Sirius is trading like a stock thats being suffocated. They are dying to kill the current stockholders, so they can transfer wealth. From people who bought at 3 or 4, etc.. to people who want to buy at 1.40, 1.32. These people are greedy. WHen they see a sure thing, they like to get really greedy. If people on here are too stupid to realize whats going on, then sell your shares to the smart money. The stock does not move as the market so, market forces are not keeping it down. Guidance will help, but until the 1.5 million share wall of shorts keeps blasting the stock price, its not going to go anywhere. When the ACTIVE DAILY shorts are done with the dumb money, then and only then will it turn north. Probably while your sleeping.
    Reply
  •  
    Aug 26 10:06 PM
    Scot here. Mr. Vicar, I thought you had retired as some time has elapsed from your last post. Well, let me be the first to welcome you back as you grace this board with your presence. So now, with the formalities out of the way, I will once again ask for guidance in choosing another good company to invest in. And remember the rules: No analysis or numbers games -- just the name of the company itself.

    And oh, I almost forgot, there is one more thing: I love the verbal sparring on this board: I can't help it as it makes me laugh and that's a much better tune for my ears when so many others live in a world where all they hear are tears....

    Scot's Slant
    Reply
  •  
    Aug 26 10:33 PM
    So let's see.... GM near chapt 11 and sixm near chapter 11... my, my those American's are such good business people.
    Reply
  •  
    Aug 27 07:23 AM
    Relmor, thank you for the backup. I don't know why he got so touchy. A lot more people on this board have positions in the tens of thousands so my postition is nothing but a pittance. I was not ashamed to post my big loss (which the margin call DID hurt, because I'm far from being well-off) so people wouldn't feel bad about their's, and to let them know to be patient because everyone WILL recoup. Also, every week I read about Tyler-bashing, Cramer-bashing, etc...People need to look in the mirror and blame themselves first. The only legitimate beef anyone can possibly have is with the FCC.

    Kevin1158, who the hell are you to tell anyone "a simple this or a simple that will suffice?" Let's get one thing straight: You are not The Emperor, and I'll write whatever I want, whenever I want, so long as I don't attack anyone personally. And if I do lash out at someone, it will be because they deserved it; just ask the Vicar of Value. And I'm sorry that my thoughtful post "lost credibility" in your eyes. It's gonna bring me many sleepless nights worrying about it. You waif.
    Reply
  •  
    Aug 28 06:40 PM
    Gekko13, I for one find it more interesting when I know someone's position on the stock / company they are commenting on. I have debated with folks on the opposite side of my "Long" position and have found some of their arguments quite credible. I have debated or discussed this company with Longs who I also disagree with, usually because they're looking for the quick price pop and out. These folks say their long siri but really are just traders. The fact is Shorts have made money and Traders have probably broke even or are now in a stock that they can't get out of without taking a difficult loss because of the lack of pop on the merger approval. Then their are folks like Vicar who have no position, at least that they're willing to declare, and just taunt, with peripheral metrics that really matter little to the company's future success.

    So for my part, thanks for sharing your investment experience , as painful as a margin call might be, and let's see what September will bring. Some interesting things that have been done in August are:

    1. Merger Appeal Date at the FCC went by I believe on the 27th without any major news.
    2. The sale of the 7 % Exchangeable Senior Notes financed by UBS/ Morgan Stanley for XM using Sirius' lent shares for shorting have probably already hit the market and we didn't go to a $1 / sh.
    3. We've had complete silence from the company as employee reduction and reorganization plans are being completed, at least the first round, and those savings will begin to be felt in the 4th quarter.
    4. "Short" interest between Aug 1 and Aug 15 went down in spite of #2 because the XM Arb Players covered their Siri short positions post merger to cash out on the conversion, and we didn't go to a $1.
    5. "Short" interest has been and will continue to decrease as we head to the end of the month, as most shorts cover before the company guidance for synergies, debt, and revenue are rolled out, and we haven't gone to a $1.

    With all this negative impact stock activity happening and we put more distance from the merger announcement I am looking forward to September.
    Reply
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