another interesting article by BRANDON from another boarrd informative 9-Jan-11 02:02 pm This is a BRILLIANT and well laid out scenario to why share price continues to run up and short interest has remained flat! I believe these guys dont know at this point whether to poop or go blind in hopes of some broad market slam to put he breaks on! Not going to happen! SIRIUS XM Currentprice was taken down by NAKED SHORTING prior to Broad market falling in 2008 as one can derive from the fact of share price falling from $2.25 on day merger approved to $1.36 in just 10 days afterward on August 4th 2008.. Maerket didnt drop till WEEKS later.. Chart is a STRAIT line.. Price will run past $3 in short run with a LITTL help from broad market. IMHO..
Two convertible notes are in play that can have major effects on Sirius XM’s share price this year. The first is a 7% XM note that is convertible at $1.875. The second is a Sirius 3 1/4% note with a conversion price above $5.00/share. The 7% notes will likely be converted to common stock in the near future, and the 3 1/4% notes expire in October. This will result in over $750 million in Sirius XM debt being wiped off its books, which will result in improvements to several key financial improvements to Sirius XM, which in turn will warrant increases in the price of the common stock. The removal of these notes will provide for credit rating upgrades as well.
These two notes represent a quarter of all Sirius XM debt. This significant reduction in Sirius XM’s debt will have an immediate impact on its enterprise value (EV). It is the EV/EBITDA multiple that is used to value the share price of Sirius XM. For this reason, share count and therefore earnings per share (EPS) are of no value and therefore a moot point, directed at uneducated investors.
To review quickly, EV is calculated by adding the total debt to the total market cap, and subtracting the cash on hand. For example, let’s use round numbers and assume the following for a fictitious company.
•Market Cap: $5,000,000.00 •Total Debt: $5,000,000.00 •Cash: $1,000,000.00 The enterprise value of this fictitious company would be $9 million, after adding the market cap to the debt and subtracting the cash. That is the value placed on the company by investors, which is validated by the market cap, which will rise and fall inversely to debt. If the company takes on more debt, its market cap will fall. The market cap is simply the price of the stock multiplied by the total number of outstanding shares. It then stands to reason that the removal of $750 million of debt from Sirius XM’s books will cause a natural increase in its share price, increasing its market cap to maintain the same enterprise value.
This poses a problem for short sellers. The short positions created through convertible arbitrage will have to be covered. In the case of the 7% notes, over 200 million loaned shares will be returned to Sirius XM and retired, which in turn will also lower Sirius XM’s market cap, warranting a higher share price again. Why then would short interest be increasing now? We’ll examine those possibilities in part 2
Link to this cut out: THanks again Brandon Mathews
< Previous Message | Next Message > View: Simple | Summary | Expanded As: Threaded | Msg List Page 1 of about 1 First | < Prev | Next > | Last Messages in TopicMinimum rating: 5 stars 4 stars 3 stars 2 stars + unrated 1 star + unrated What's this? Subject Author Rating Time of Post (ET) THanks again Brandon..Morning article VERY helpful and ... johnclydeke... 9-Jan-11 02:02 pm Re: THanks again Brandon..Morning article VERY helpfu... LOL 55 ratings? Unreal how persistent the bashers ... NewYorkCPA 12 minutes ago Re: THanks again Brandon..Morning article VERY help... Persistent or sophisticated racket? You de... sirius_sque... 7 minutes ago Re: THanks again Brandon..Morning article VERY he... Persistent or sophisticated racket? ... NewYorkCPA 3 minutes ago View: Simple | Summary | Expanded As: Threaded | Msg List Page 1 of about 1 First | < Prev | Next > | Last < Newer Topic | Older Topic > Get Message Board for: AdChoices SIRIUS XM Radio Inc. (SIRI)
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