Quarter Pounder With Fleas at Sirius XM

He's at it again, Sirius XM Radio (Nasdaq: SIRI  ) investors. Goldman Sachs analyst Mark Wienkes is talking down shares of the satellite radio provider, slapping Sirius XM with an embarrassing price target of $0.25 a share.

Wienkes hasn't endeared himself to Sirius XM shareholders, or at least those still sticking it out in the company. Those who heeded his apocalyptic warnings and bailed several months ago probably owe him a gift for the sharp losses they were spared.

Just don't make that gift a satellite receiver.

The worst part of believing in satellite radio is that Wienkes has been right all along. Sirius XM has difficult debt repayments due next year, and time is ticking. Even if Sirius is able to overcome the hurdles, it will probably be at the expense of massive dilution to a company that has billions of outstanding shares to begin with.

There are many challenges to satellite radio:

  • Smartphones like Apple's (Nasdaq: AAPL  ) iPhone can stream Internet radio.
  • Carmakers like Ford (NYSE: F  ) are installing CD-ripping hard drives into vehicle stereo systems.
  • Music subscription providers like Napster (Nasdaq: NAPS  ) and RealNetworks (Nasdaq: RNWK  ) are making their streams more accessible.
  • Internet radio heavies like Time Warner's (NYSE: TWX  ) AOL Music and CBS' (NYSE: CBS  ) Last.fm are reaching out to wireless phone users with free apps. 

These things aren't exact substitutes for satellite radio. Just ask any of the 18.6 million Sirius and XM subscribers. However, the real shame here is that Sirius XM's undoing -- if it comes to that next year -- is its own doing. Between a mountain of debt that is due in 2009 and the negative free cash flow from its current operations, every passing day makes it harder and harder for Sirius XM to avoid bankruptcy or deluging its shareholders with dilution.

Curses! Wienkes was right.

More news than static on Sirius XM:

Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (4)

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  • Report this Comment On October 29, 2008, at 2:49 PM, cheleg wrote:

    Wienkes is a Weiner

  • Report this Comment On October 29, 2008, at 4:44 PM, bittymack wrote:

    You only send out articles on SIRI because you know how popular the stock is and everyone will see your name over and over again. So, your comments mean nothing. Also, if analysts were right, we would all be rich. Go with your gut. Siri long.

  • Report this Comment On October 29, 2008, at 5:41 PM, BooyahSirius wrote:

    Don't take Wienke the Whiner too siriusly.

    Wasn't it a Golden Slacks analyst that predicted oil would reach $200 a barrel?

    I think that anyone who wanted to sell SIRI at these levels has already done so. Now is the time to buy, not sell !

  • Report this Comment On October 29, 2008, at 6:02 PM, JasonMichael wrote:

    What came first the GS bashing or the stockholders bailing out?

    This is the same tired crap that keeps being published. Iphone, napster, blah blah blah.

    Your forgot to mention the ipod and shrinking new car sales as the other harbingers of doom for Sirius.

    Siri is digging themselves out of the hole they are in - just like a lot of good companies are doing right now.

  • Report this Comment On October 29, 2008, at 7:18 PM, MikeRehling wrote:

    GS 'predicted' a price drop to .25 AFTER the stock had hit .22 a few days earlier. Thanks, but no thanks to GS!!!

  • Report this Comment On October 29, 2008, at 9:29 PM, FoolNHisMoney wrote:

    Hmmm, Wienkes issues a negative report just a day after a big jump in share price, and Mel’s interview outlining Sirius’s positive progress – subscriber growth is on target and churn rates are not in fact rising. Also how does he justify the claim that subscriber acquisition cost is rising with $425 million in realized synergies? And guess what, the company has been losing money every quarter since it started, so no duh it does not have positive cash flow yet. What’s new about that? Yet we know that it’s on the cusp of turning it’s first profit with over 18 million subs and rising it’s a clear-cut path to profitability even with the weak economy projections. You’d think that would be something that investors can bank on, yet Wienkes “thinks” he has better information than the CEO himself has on his own company and directly contradicts his numbers which are based on actual data!

    Consider this. If the share price is where it should be, i.e. before Wienkes started began his campaign then Sirius would have no problem refinancing it’s debt without equity dilution. Sure we would have seen a hit with the market turmoil, but a large part of Siri’s price right now are a direct result of Wienke’s actions, not the market downturn. Hmm, add in that GS holds some 42% of the $300m convertible debt due in Feb and it’s easy to see why it’s in their best interest to keep the stock price down. Not to mention that GS investment banking has previously been caught illegally influencing it’s analysts (can you say hedge fund shorts?) to manipulate stock prices. I again ask how many of the exchange leading Siri short sales are held by hedge funds?? That’d be a real interesting stat if someone has access to the information. Something tells me we’ll see a sudden change in heart from Mr. Wienkes once that GS convertible debt is turned into shares, and he’ll suddenly see a rosy future for satellite radio . . . which of course it’s had all along.

    The only thing that I don’t understand is why the shareholders buy into GS’s garbage? There are enough banks and analysts reasonably bullish on satellite radio provided the stock price is not in the pennies. The company’s equity alone should far exceed the $800mil market cap that GS intends to drive the stock down to, and add in $1+ billion and rising revenues and near term positive cash flow and profits – how do you justify a 0.25 share price? The only thing that can counter their smear campaign (other than an SEC investigation that is obviously not going to happen) is to not sell at their scandalously manipulated estimates!

  • Report this Comment On October 30, 2008, at 1:11 AM, SiriusMars wrote:

    Sirius is much more than what most people understand today. The companies I.P. goes way beyond Sat Radio. The ability for Sirius consumers to listen to an ad over the sat radio and click on a button to have more information sent to the consumers email alone is going to be worth the billion dollar debt they are going to need to come up with in 09. We are the Tech South Hedge Fund, new group and understand tech. Sirius is a big buy, not only their stock but their company and I.P.

    We predict it will be much better to be the tech in the car than the hardware of the car. Time will tell, but consumers behavior are telling us that Sirius XM has a very bright future and we predict the stock to be at $1.00 before the reverse stock split of 1-10 early next year. We are a new group and understand ad tech. Sirius will become bait for some very large hedge fund or media company and the very near future. Check the I.P. and you will see this companies time has come in a big way. Go long and deep this will become one of the darlings. Sat Radio can also provide location advertising which will become a huge business. When you are driving by a shopping mall your sat radio can notify of stores in the mall and allow you to get directions and all kinds of great stuff. Look deep into I.P. and you will see what we see.

    Huge Buy, Target price of $1.55 by first quarter of 09 or sooner depending on upcoming debt plan. Rev up to 400 m to 550m in 09. The consumer connected to Sirius XM is of a higher demographic, so the upper scale auto market which is somewhat R proof will play big for Sirius and their numbers coming out.

    Win big and give to Charity !

  • Report this Comment On October 30, 2008, at 3:20 AM, Pinemyst wrote:

    I just brought a new car and got Siri free for a year. How is this going to help with subscribers?

  • Report this Comment On October 30, 2008, at 9:21 AM, frankiecooper wrote:

    pinemyst -

    you BROUGHT a car?? huh?? got siri free for a year? you'll still get added to the tally, don't worry.

    as far as analysts go - have they been right this year? really?

  • Report this Comment On October 30, 2008, at 11:10 AM, kwik67 wrote:

    I don't understand why Dish Network or DirecTV are not looking at taking over Sirius.

    Dish and DirecTV already have deals with the NBA, MLB, NHL that can be reworked if they owned satellite radio.

    Satellite radio has content that could be aired through Dish or DirecTV that could create a few more channels in which commercial time could be sold.

    Plus, if either TV satellite service owned SiriusXM, they could create a package bundle that would be part of the TV Service.

    personally this is a no brainer merger, now if only the FCC would approve of it would remain the only question

  • Report this Comment On October 30, 2008, at 5:25 PM, richardatirs wrote:

    The problem is dilution. I am surprised that SIRI hasn't tried to address this problem by going directly to its subscribers. That is what I would do. Do I want to pay $5.00 more per month, heck no, but I don't want to lose my investment in SIRI nor do I want to lose the provider of the best radio that has ever come along. If 18 million of us paid $5.00 per month extra for the next six months, it's virtually painless to us, brings in over $500 million in cash to pay off the debt and stop the dilution of SIRI shares. It is unbelievable that with such a loyal customer base that SIRI does not tap into this rich vein and create an incredible win win situation for everyone. There is no point in knocking analysts or investment bankers, because as I often say, if any of them really knew what they were doing, they would do if for themselves rather than sell their so called knowledge to others.

    richatirs

  • Report this Comment On October 30, 2008, at 8:38 PM, sl6209 wrote:

    richardatirs...

    As part of the merger agreement, SIRI is prohibited from raising rates for 3 years post merger...

    Rick (Captain Obvious),

    Any other obviousness you want to lay on the rest of us? Jezz man, you've written the same article about 100 times now. Nothing else to write about? Here's how lame your content is this time...

    1. Stanford Research took SIRI down to .25 on 10/16. Well before Weinkes.

    2. Janco Partners issued a flat out suspension of price target PLUS outright nearly proclaimed malfeasance due to SIRI not doing what THEY SAID they would do even before that.

    3. SIRI is still rated an overall BUY because of lame still remaining price targets of 2.00, 4.00, you name it. All junk.

    Rick. Forget about writing about SIRI. They have purposefully let things get so bad that even negative articles don't affect them any more. NO sane person would be buying this company as a solid investment. All that's left is the bondholder short hedge money and day traders (and thanks at least to the latter or this stock would just be flotsam as it was before the last mini short squeeze bounce off of .20). Once they dilute and reverse, they will attract a whole new bunch of believers who will get their arses handed to them as the old ones have.

    Weinkes? He's a big whatever. He's not the reason the stock tanked. SIRI doing BONDHOLDER financing in THE LAST WEEK AND HOUR before the leveraged buyout closed, with ruthless IB's is. That ones on Mel and Co. Blame them not Weinkes. WTF? He's just justifying his freaking worthless existence. What else do you expect from financing where the sole purpose of the bondholders is to short the common into oblivion. Mission accomplished! Hey Rick. Did you see the prospectus supplement that was posted to the public recently for a few hours then pulled? Actually finally explaining all of this to the public? I doubt you did Rick but you can go find it tucked neatly away at Edgar. It's that little Form 424B5. Maybe next time you're writing an article about SIRI (you know for the people Rick?) why not posit why SIRI waited until Tuesday Oct. 28th as the stock price sat at .38 to release that info to the unsuspecting shareholders. Many of whom won't even read it because it was pulled so fast.

    Tell the truth Rick. Be a real journalist for a change instead of all this candy coated bubble gum junk you write (over and over and over). Bring something interesting to the game maybe huh? Thank you.

  • Report this Comment On October 31, 2008, at 11:06 AM, MikeRehling wrote:

    sl6209,

    The filing is there: http://investor.sirius.com/secfiling.cfm?filingID=950123-08-...

    It was never 'pulled' and can't be after its issue.

    GS owns some of the debt and that is troubling, what is more troubling is that the stock was below the GS target three days before he 'called it'. There are varying accounts from analysts also:

    http://seekingalpha.com/article/103170-barrington-stays-posi...

    This is a high risk stock. Love it or leave it, but know that the risk/reward ratio is high on either side of the bet.

  • Report this Comment On October 31, 2008, at 11:50 AM, BABABOOE wrote:

    Goldmans Sak is a bunch of stock manipulating crooks. Weinkes is a doosh. How can it be legal for Goldmans Sak to have an interest and put out manipulating press reports? Never underestimate the power and determination of Mel Karmizen. Mel's a genius. Of all new cars sold with free satellite, half continue with the service and half do not. Mel ended up with a bunch of extra bandwidth because of the Sirius-XM merger. Now he's creating a new line-up of 10 new channels just like "FM" which are going to be FREE PROGRAMMING!!! Now everyone who has a satellite radio in their car can simply reactivate it for free. That translates to millions of vehicles.Or any satellite receiver that's inactive. And just like "FM" it will have commercials and generate tons of revenue for Sirius-XM. The beauty is you'll have the same 10 channels anywhere in the country. Direct competition for "FM" radio. Of course like basic cable TV you'll be able to add additional paid programming ala-carte if you choose to do so. And another thing...when Mel was on the Stern show shortly after the merger, he told Stern he didn't just go through this battle to have Stern walk at the end of his contract. More recently Stern said he still had about 4-5 good years left in him. Finally America will not go out of business. Eventually the economy will come back, cars will sell again and Sirius-XM will triumph.

  • Report this Comment On November 01, 2008, at 11:02 AM, sl6209 wrote:

    MikeRehling...

    I won't insult you...this time!...but duh, I know it wasn't pulled from the Siri investor page, that would be illegal. What I was talking about was it was pulled from the mainstream financial reporting sites (yahoo, aol finance, etc...). Poof, it was gone as fast as it appeared. And my ultimate point to Big Rick was that is not the kind of document the company wants hanging out where the public can easily get it. They make you either go to their website or Edgar to see it. But by posting it to the media for a few hours, they satisfy their requisite reporting duties. See? And further, how interesting that their other latest 8K filings and the proxy are all still out in plain sight. This one...nope. That's the point. Mel calls his shareolders unsophisticated. That's how they pull important docs and no one even misses a trick. How many shareholders even noticed this little subtle form of protection by teh company? If you are not astute, this company will rob you blind my man.

    Rick....since I had to take the time to set this matter straight.. I ask you one more time. Please do some reporting man!! Leave the lightweight stuff like this and your article from yesterday behind and tell some truths about the stock and company. It's all there if you just stop phoning in your stuff...Then people will give you cred!!! Thank you.

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