Posted
Apr 03 2008, 11:45 AM
by
Douglas McIntyre
When the Justice Department cleared the merger of Sirius with XM Satellite there was anticipation that once the deal got done the shares of both companies would go up. A year ago, the combination was viewed as a dream deal.
If anything, the shares have dropped. Sirius is below $3 and XM is below $13. The market began to realize that the year wasted on getting government approval was a year the companies need to stay competitive. XM has over $1 billion in debt. Refinancing it in the current market would be nearly impossible. Selling shares would lead to extremely large dilution. As we recently noted, Goldman Sachs even put Sirius on its "Conviction Sell List" with a price target of $2.25.
Growth at Sirius has slowed considerably. In the fourth quarter revenue rose only 29% to $250 million. But, for the full year, revenue was up 45%. Subscriber deactivations in the fourth quarter were almost 540,000 compared to 330,000 in the same quarter of 2006. The firm's net loss was $166 million. Long-term debt was almost $1.3 billion.
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