From Another Board (makes sense)
I have come to the conclusion that one of the last great growth stories in America is the company that produces the stupid pills that are consumed on a daily basis by SIRI's commentators and stockholders. Here are three stories that were never written that will have an impact on the share price in the short and long term.
The first revolves around Mel's statement at the media conference that he did not expect to use SIRI's free cash flow to pay off the debt..."I do not expect to turn SIRI into an investment grade company." The question that you as an investor should have is WHY NOT? Don't I want the balance sheet cleaned up so that shareholder value is enhanced? On the surface this should be the goal. The problem is that once the debt is gone SIRI would become a takeover target because of the NOL's and trust me you DO NOT want the company to become a takeover target.
Let me show you how the debt acts as a DETERRENT to a take over. Everyone knows that SIRI has 7B in NOLS that will save someone 3B in taxes between now an 2020. The problem is that the company has 3B in debt and so if you acquire the company, the NOL's and the debt are a wash. You are not saving 3B. You are taking 3B from the government and giving it to the creditors while paying 7-10B for the stock plus interest. I know you are saying SIRI's free cash flow will pay the debt...maybe but there is no guarantee about future cash flow and the debt is real. If SIRI had no debt it would become a MORE attractive take over candidate and Mel is trying to prevent that from happening.
That brings us to the question, don't I want a takeover. The answer is yes if you are a total idiot. When a company is taken over by a corporate raider like JM or Carl I, it is done because they can buy the company at a deep discount to its true value. In other words, the shareholders get screwed which is apparently what you desire since most of you are in favor of a takeover. A takeover today would get you no more than 2.40 a share and just two months ago you would not sell at that price. These guys didn't get to be billionaires by paying fair value. Go watch the original Wall Street and learn how the game is played.
At least on the surface, Mel is trying to protect you from your own imperfect instincts. It might be nice if you actually had the ability to recognize this fact.
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