SIRI: Shares of the Satellite Radio company SiriusXM (SIRI) have traded with increasing volatility of late before culminating in a 20% drop on Friday on over seven times the normal trading volume. Of note, SIRI was trading up most of the day before the last hour sell-off.
Last week Sirius XM's sale of Senior Secured notes, due in 2013, were extremely popular and the company was able to raise over $500 million to pay down existing debt that was to come due this year. Shares traded had traded nearly 20% higher on that news before Friday's drop.
The surprising popularity of the notes is a good sign for investors and the paydown of XM's massive debt eliminates any imminent possibility of bankruptcy. The company narrowly escaped that fate earlier this year when John Malone of Liberty Media rescued SiriusXM at the eleventh hour.
On the content front, two press releases, one each issued by Sirius and the Associated Press, stated that Rosie O'Donnell will launch a morning program this fall on the Sirius Starz channel (SIRIUS channel 102 and XM channel 155). While I'm no fan of O'Donnell, she is a perfect fit for Satellite Radio and if she proves to be as controversial as she has been in the past, she'll bring in a fair amount of viewers and provide free press for the company. Free press translates into free advertising.
Also of note, the company received an upgrade by Barrington Research last week.
This week could be an exciting one for shareholders of SIRI. Friday's drop was a head fake (contrary indicator), in my opinion, and judging buy the volume, someone is loading up on shares and the much anticipated spike to over a dollar may be in the works.
That's not to say that an investment in SIRI is without long term risk, the debt payments are just delayed, not eliminated, but the company now has a long time to ride out the economic recovery and streamline towards profitability.
I maintain that SIRI is a good buy for under a buck, but it will take another quarter or two of economic recovery to get a good indication of weather Sirius can turn profitable anytime soon.
Disclosure: VFC is long SIRI
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