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Sirius XM Stays Alive, But Internet Media Continues Attack

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One of my frequent readers sent me an article earlier in the week that talked about the Sirius XM/Liberty Media deal that saved the fledgling satellite radio company from bankruptcy. As a shareholder in the company, believe me when I say that I was watching the newswire with baited breath on Monday night/Tuesday morning waiting for news of an announcement heralding Sirius XM being saved from the financial woes – and after a long while, that news finally came.

As the article linked above puts it:

The money-losing home of Howard Stern, Opie & Anthony and the NFL got a $530 million investment from John Malone’s Liberty Media Corp. that will keep Sirius XM out of bankruptcy. Shares of the New York-based company are soaring.

Malone is demanding a steep price in exchange for bailing out Sirius XM. Liberty will provide a senior secured loan of $280 million which matures in 2012 at an interest rate of 15 percent. Sirius XM, though, may have had little choice but to accept such a high interest rate because it had $171.6 million of its maturing 2 1/2 percent notes due Feb 17. Even with today’s huge run up, Sirius shares are down more than 94 percent over the past year.

In the second phase of the investment, Liberty will provide a $150 million loan and to buy $100 million in loans issued to XM Satellite Radio. The company will then issue Liberty 12.5 million shares of preferred stock which is convertible into 40 percent of the common equity. Malone and Liberty CEO Greg Maffei will join the board of the satellite radio company.

I take issue with the article’s use of “money-losing” as an adjective to describe Sirius XM. If you look at the figures, Sirius was on the brink of making money before it acquired XM and their unbelievable debt load. At this point, though, that doesn’t mean much since there is only one company – Sirius XM.

Since the deal was finalized, many online media sources have commented on it with varying levels of support (or contention). The New York Times’ DealBook blog, for example, looked at the Form 8-K filed for the transaction and proceeded to tear into the particulars of the deal (which are admittedly not the greatest). After the Times posted their review of the 8-K, stock prices for the company began to sink. In terms of real dollars (cents?), the stock price was at 18 cents before the Times posted their review. The stock price is now at 12 cents.

For months I’ve been harping about how Sirius XM is a great niche product for those who have extra long commutes and those who want special content like Howard Stern. The company is also poised for success in the long-term as it has some 20 million subscribers paying generally $13 per month for their service. That’s approximately $260 million per month; over $3 billion per year. Of course there are costs that have to be deducted from that $3 billion figure each year, but over time that built-in revenue base is a gold mine.

I have to wonder, though, if Sirius XM will be able to succeed in the long run with the way the internet media continues to lambaste and destroy it. The Motley Fool has it out for the company and it would appear that the would revel in its failure. And with the way the New York Times’ DealBook blog is listened to by investors, you have to wonder how many more negative reports the company can withstand in the current market.

Comments

  1. Do you have any specific articles from Motley Fool to back up your premise? I usually see a lot of Motley Fool articles about Sirius XM and do not find them very negative. Any other online publications?

  2. Thanks for the comment, Arthur. The image of Sirius XM that the Fool website gives off is negative. Unfortunately, many investors don’t read the full articles, but only the beginning of them or (even worse) just the headlines. Here are some examples of negative headlines:

    “The Signal Fades at Sirius XM” (September 11, 2008)
    “World’s Scariest Stock: Sirius XM Radio” (October 31, 2008)
    “Is Sirius XM Being Too Cheap to Succeed?” (January 13, 2009)
    “When Will Sirius XM File for Bankruptcy?” (January 15, 2009)
    “Worst Stock for 2009: Sirius XM Radio” (January 28, 2009)
    “Fool Poll: Game Over for Sirius XM?” (February 12, 2009)

    If you just read those headlines or the first few lines of each article, you’d think that the company was closing up shop any day now. As for other online sources that are attacking Sirius XM both TheStreet.com and MSN’s Money website haven’t been so kind in the recent past. Plus, there are often twisting reports going around about what Howard Stern will be doing in the future and that he may leave Sirius XM when he states very clearly on his show that he is not going back to regular radio.

    Focusing on Stern potentially leaving when he clearly is not going to is a major detraction from the stock’s success due to Stern’s major influence on subscriber growth. Thanks again for the comment.

  3. What a great article, as a siri shareholder it is nice to see some1 acknowledging the obvious bias the media has for satrad, can any1 say nab? I have gotten to the point i find it heard to search for any siri new’s cause it is filled with hit pieces that leave out all the good and hammer in the bad. Thanks for giving me something nice to read about siri 😮

  4. Thanks, Mark. The internet media LOVES to rip apart Sirius when, in fact, it’s not that bad of a stock to own if you’re in it for the long term.

  6. Another negative article on Sirius XM from Motley Fool today:

    “Sirius XM Tunes Out the iPhone” (February 27, 2009)

    Yeah, Motley Fool doesn’t have it out for Sirius XM (sarcasm)…

  7. The hits keep on coming from the biased Motley Fool site. I wish that Google didn’t have this biased organization automatically fed into their Google Finance posts:

    “Is Sirius XM the Next Vonage?” (March 2, 2009)

    And how is this biased? From the article: “Sirius XM issued a press release this morning, delaying the filing of its annual report. The company will now discuss its financials for the final quarter of 2008 on the morning of March 17. Shareholders, start fretting.”

    Shareholders, start fretting? Are you for real? What a joke the Fool website has become.

  8. Another day, another negative article from the biased Motley Fool website.

    “The President’s Plan to Destroy Sirius XM” (March 4, 2009)

    Seriously, how much longer will this go on before anyone in the major financial media starts to make mention of the obvious vendetta against Sirius XM?

  9. True to form, Motley Fool comes back every other day with another negative article.

    “Even Sirius Doesn’t Know” (March 6, 2009)

    A quote from the article: “It’s easy to see why Sirius XM is finding it hard to defend its life. It may have scored a juicy $530 million capital infusion from Liberty Media, but there are more strings attached there than at a marionette factory. Investors initially applauded February’s infusion, but it technically only bought the company another three more months.”

    My God! Just come out and say that you want the company to fail already!

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