I only say "cult-like" because shareholders now have an actual
documentary portraying the supposedly nutty valuation at which this
company trades. I haven't watched the full documentary, Stock Shock -- The Movie. I'll have to wait for its June 10 debut.
I did, however, watch a two-minute trailer showing the supposed shareholder struggle -- which falls somewhere between arbitrage and conspiracy theory. As it says on the website for the documentary:
Sirius XM satellite radio is one of the lowest priced stocks in the
market. This, despite the fact the company is a virtual monopoly
(having merged successfully with XM radio) and generates nearly 2.5
billion dollars each year with its 19 million subscribers. Even as
Sirius XM has a growing number of fans and market potential, the stock
has traded for as little as 5 cents per share making "short sellers"
filthy rich.
Oh boy ...
I find that staggeringly misleading,
to be polite. If a documentary is being sold for $15.99 on a wave of
accounting misconceptions and a general lack of understanding of how
investment value is created, viewers deserve a quick rebuttal.
Here's a brief clarification of three widespread misconceptions about Sirius XM:
(1) Sirius XM is one of the lowest-priced stocks in the market.
Lowest share price, OK, but that in itself means precisely nothing. Share price viewed as an independent number gives absolutely no indication of a company's value. None.
What's really important is a company's market cap. Let's get back to
basics here: The market value of a company is its share price
multiplied by shares outstanding. That's why Berkshire Hathaway ( NYSE: BRK-A) at $89,000 per share has a lower market value than Microsoft (Nasdaq: MSFT) at $20 per share.
Looking past the completely immaterial fact that Sirius XM trades at
$0.39 per share, you'll find that it has a market capitalization of
more than $1.5 billion. In fact, Sirius XM is larger than 30 of the
S&P 500 Index components. That's a far cry from drowning in a world
of valuation triviality, especially for a company that was recently inches away from filing for bankruptcy protection.
Yet even that is meaningless when discussing what this company is really worth. As Warren Buffett says, "Price is what you pay, value is what you get." Which brings me to point No. 2 ...
(2) If revenue and subscriber base are blowing through the roof, why aren't shareholders zillionaires yet?
Investors
love pointing out facts like "revenue has jumped from $13 million in
2003 to over $1.6 billion in 2008," or that Sirius XM's subscriber base
is now a massive 19 million people and counting.
What you'll never hear discussed is profit. There's a reason why: Sirius XM has never, ever, made it before. Not a single dime. Ever.
That isn't an irrelevant fact to overlook. If a company spews perpetual losses and continuously burns cash,
it isn't worth a can of string beans. Revenue and customer base as
standalone metrics mean absolutely nothing when it comes to shareholder
value. General Motors (NYSE: GM) logged almost $150 billion in revenue in 2008; AIG (NYSE: AIG) has 74 million customers worldwide. How's that working out for them?
(3) Ah, so it must be those darn short-sellers!
Manipulation! Fraud! Scams! Let's kill all the short-sellers!
As the documentary's trailer notes, an army of wicked short-sellers
is frequently blamed for robbing shareholders of their riches.
But does the short-sellers-ruined-my-life argument actually hold up to a few basic facts? Hardly.
Looking at shares sold short as a percentage of total shares
outstanding, and comparing it with the entire universe of stocks,
Sirius XM doesn't rank first, or second, or 10th ... it ranks 1,332nd.
To my knowledge, not one of the 1,331 companies with deeper
short-selling attacks has a documentary pleading for help. You want to
see what a short-selling nightmare looks like? Check out Portfolio Recovery Associates (Nasdaq: PRAA), where almost one-third of shares outstanding are sold short.
Bottom line
Look, I'm not saying there isn't
value here -- or even that the documentary won't make valid points --
just that I haven't seen a single argument for buying into this company
that doesn't ignore its perilous financial situation, or isn't based on
pure trading speculation.
Nonetheless, I'd love to see one. Desperately so. If you can scrape
together an argument for why this stock's a good buy and will stop
spewing losses someday, please, fire away in the comment section below.
© 2009 UCLICK, L.L.C.
Some strong points are made
Some strong points are made in your article, but I feel it looks too much at the past and not at the potential future. While it is surprising that no profit has been made on SATRAD in 15 years, SIRIXM is a new company with new leaders and appears to be forming a new approach to the industry. I bought this stock giving consideration to the future potential and the value of its assets being worth more than their paper worth. Also expecting that the combined company will do a good job of getting their costs reduced and will be turning a profit soon. With regards to the shorts on SIRI, my understanding was that many are short to hedge their bonds and the short counts are creating a false negative sentiment...not buying into the conspiracy theory nor will I buy the movie!
I am long
the comments on here just echo the craziness of the cult following love for this stock. I don't get it either. but at this ridiculous price, I'm in and holding long. i have to be long, it's not moving much at all.
Will they ever stop spewing?
My repsonse is John Malone. The voice of reason vs. the indiscriminate spewing of cash by Mel Karmazin and his ex, XM counterpart. They are a perfect example of two people fighting on a plane that is doomed to crash. They could not see the forest through the trees. John Malone will make reason out of chaos.
Time will tell won't it?
Sirius Ads
Hmmm . . . does/did anyone else see the large Sirius banner ad? Maybe Morg's practicing a little reverse psych.
Maybe we should march right out and buy a HUGE chunk of this security. Maybe we should lock on to more Liberty Media as long as we're at it. Maybe I should go to Las Vegas and hit the Baccarat tables. Maybe . . .
reply to writer
Kind of reminds me of the dilemma with Apple back when the stock was at $12. At the time I was an OS user and believed in the product and couldn't reconcile that the company would fail as it was a player in the industry. Sirius/XM is the future to enjoyable and intelligent radio. How can this concept fail?
The point is, SIRI IS
The point is, SIRI IS undervalued. Any young company that is just starting up, launches billion dollar satellites, acquires it's only "true" competition (XM), and employs some of the best talent out there IS going to burn through money. I am long on SIRI and I suggest all of you readers out there do the same because nothing feels better than throwing $5,000 into a stock on a belief when it's only .06 and watching it grow to .40 in a matter of months (feel free to do the math, I'm only 26 and you better believe I have a cool-aide smile).. Morgan, look up Potential in the dictionary, because clearly YOU have none and SIRI has plenty...
The company could and most
The company could and most likely will be a good investment because of potential. If you watch closely you will notice certain things taken place withi the company and outside. They are evolving and pouring into new markets. The company at any time can simply announce a stock buyback program and the price will jump.
With a huge company supporting them, many more markets to integrate, the best satellites in the sky, a huge subscriber base, good product, loyal customers...it is innevitable the company will succeed. The argument is basically right NOW they are not on top. But if you saw your favorite sports team make trades to obtain the top 5 players in the league...isnt it safe to say they will most likely make it to the finals?
Just be patient.
SIRIUS Mistake
I think people are missing the most important part of this entire SIRIUS situation. Subscribers to SIRIUS XM love it. That's why I think it will do better in the market.
Anyway, I got an online account and bought $1000 worth when it was at .29 because of the way my Dad talks about it.
Morgan you're such a retard
You have absolutely no understanding of how valuation takes place and your assumptions about Market Cap vs shares outstanding is hilarious to listen to when you can't even put your grammer together correctly. I hope you enjoy this criticism.
GFY
Idiot x2
Why is it when someone makes a valid point you remove the comment from the board, talk about an open forum... You're pathetic and should find something new to write about. How does writing for the WNBA sound, I bet that would be more your speed. Once again, your article is clearly one sided and poorly researched, I hear Rebecca Lobo needs a publicist...
Mr Blah's world~
Closing in on an 8-bagger. Where are you? I should start a blog for those who can stomach my atrocious spelling but winning stock picks. I can see it now Mr. Blahs World!
Again, I reiterate, I have just wasted my time.
cough-cough-loser-cough!
..."has never, ever, made (profit) before."
Sirius XM has not been around for even a year yet. Therefore, I can't see how you can say they haven't earned a profit.
So, if you twist my arm, I bet you are in the hole on your short sales of Sirius XM, and this article was made so you can break even.
Idiot
Let me guess, "The Money Times" in its infinite knowledge is starving for attention, so lets write a article pointing out the obvious about Siri so it gets posted on the google boards. Nice job, your article sucks and so do you. Here's an idea, if your going to write an article where you claim to not be bashing siri, do some research first and support both side rather than sounding like an idiot..
To Mr. Blah
bancreptcy & analysist (really?)... Spell check please
LOLOLOL John ... That was
LOLOLOL John ... That was the correct "weather" LOLOLOL
Hostility
Gambit: If you think the "author article" is such a "small time article writer" then why are you reading, even more curious is why you are even taking your precious time to post a comment. You seem to be upset after reading his article, your cursing is just immature and unnecessary for this kind of topic, take it back to your playground. Telling someone their words "don't mean $***" doesn't quite make your words any more important or credible.
Just my opinion.
Gambit?
"Why are (we) reading?" Answer: down time, nothing else that we WANT to do at this time (that taxes our minds), severe brain fade, etc, etc . . . ad infinitum.
And regarding "small time article writer," seems like it to us! Again, that's why we SCANNED his article (read it in its entirety in 20 seconds) - because our minds were pure mush and we wanted something that wasn't challenging . . . you know, pure fantasy!
Well, back to the charts, spreadsheets and running a business (hey, career thought: maybe I can consider a career change to writing feature articles. After all, the talent pool seems to be at an all time low!).
Maybe your time on scanning
Maybe your time on scanning articles from themoneytimes.com should be spent more on scanning Forbes, CNN, or watching the news? Best of luck on your career change from running a business to writing articles for websites many haven't heard of. Probably the best move.
(Our)Time On Scanning
Forbes, Communist News Network . . . nahhh, too much of a challenge at the time! The key term probably should have been "Brain Fade" (or "procrastinating on facing the reality of another boring investment day!?").
Sure seems to be a lot of these sites "that many haven't heard of," and look what we're doing for this one, "themoneytimes.com." WHO are they? And more so, what the H@#l am I doing coming back to this post? Phew, maybe you're right, "Probably the best move" (I mean if I've got THIS much time on my hands!).
This guy's post distinctively reminds me of the old Market Watch Posts on Sirius when we used to take a break from biz for some cheap entertainment and laughs. People would get so upset and slam the articles, yet continue to support those articles by submitting EVEN MORE posts!
Blah Blah Blah
How much do your advertisers pay you to copy the same crap from other web nerds. There is no original thought here and if there was no value then why would such a company weather a storm where major banks and other major industries have failed, closed up shop, and filed bancreptcy. If there was no value why would any buddy lend 500 million dollars in this economy. You are completely in the dark. Your article is just another example of trying to drive prices down and I thank you for that! I pick up shares everyday. You and every other so-called analysist have no idea whats going on or whats going to happen. I suggest you stop wasting your time. I know that I have just wasted mine.
Spellling / grammer check anyone?
Ugh....if you're going to rip someone's writing, at least take the time to grammar and spell check your own. Nothing takes away from your credibility more than things like using "weather" (i.e. sunny, rainy, etc.) instead of "whether."
"Now i got one question for this dumb author article..."
--well put sir...that is pure poetry...are you smarter than a 5th grader???
You Are Ignoring the Savings Potential of the Merger
Yes Sirius and XM have not shown profits. I believe that is the driving force behind why they combined. They were over-spending in competing with each other, weather on marketing or to win endorsements (i.e. MLB). That competitive overspending is no longer needed. So why do you ignore this significant expense reduction opportunity in your article. You talk about Sirius XM as it has been one company all along. The combined company is not even a year old yet!
This article is in itself retarded.
Morgan needs to wake up and look into the books on SIRIUS XM once again. I know how well people start spewing stupid articles like the Motley fools, when things don't go their way. A fine example is the FOOLS who publish tonnes of crap on Sirius and pro-claiming that its gonna be bankrupt and they were sure as hell its gonna happen. Then came Liberty media with its 500,000,000.00 cash infusion into Sirius XM.
Now i got one question for this dumb author article, John malone has and always been a very shrewd and smart media mogul who invested in many media companies and has also build a empire around Liberty Group. What does he see in SIRIUS XM that the dumb fools like you and MOTLEY fool don't?
The answer is coverage, long term value, quality content, impressive subscriber rates, low churn rates etc.
When you start tryping articles like you did morgan; people never really take you seriously, due to the fact, you are just a small time article writer...urs don't mean shit.
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