Fool Poll: Game Over for Sirius XM?

Check, Sirius XM Radio (Nasdaq: SIRI  ) .

Whether we're talking about a chessboard warning, the $174.6 million tab that is due next week, or a hockey slam, Sirius XM has a lot of checks to worry about these days. Unfortunately, they're counterpointed by a lack of cash balances.

Speculation's also in heavy supply when it comes to Sirius XM. Published reports indicate that the satellite radio operator has been drafting Chapter 11 bankruptcy protection paperwork as interested parties like Liberty Media (Nasdaq: LINTA  ) and EchoStar (Nasdaq: SATS  ) ponder their next moves.

Yesterday I went over the four possible scenarios that may play out over the next few days and months:

  • Sirius XM can file for Chapter 11 bankruptcy organization, emerging with a cleaner balance sheet and lower programming liabilities. The downside here is subscriber confusion and the likelihood of wiped-out shareholders.
  • There's always a chance that Sirius can somehow find a way to raise the nearly $175 million it needs by next week on its own. It has embarked on an aggressive campaign to get subscribers to pay up ahead of next month's price hike on secondary subscription plans.
  • An outsider like EchoStar or Liberty -- or even a logical buyout partner like CBS (NYSE: CBS  ) , Clear Channel, or News Corp. (NYSE: NWS  ) -- can always emerge to invest in Sirius XM, walking away with a sizeable stake in the company in exchange for bailing Sirius XM out.
  • Why settle for a stake when you can swallow Sirius XM whole? The same list of gentleman callers may decide that it's easier to buy all of the company than to deal with any potential conflicts with CEO Mel Karmazin.

The only sure thing is that something important is going to happen at Sirius XM between now and when its February debt is due come Tuesday.

Check? Gut check? Checkmate? How do you think this will all play out?

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 (48) | Recommend This Article (32)

Comments from our Foolish Readers

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  • Report this Comment On February 12, 2009, at 4:20 PM, asm610 wrote:

    I know what isn't happening, and that's Bankruptcy....which is all I need to really know. The stock will eventually find its way north of a dollar again as all this debt is taken care of.

  • Report this Comment On February 12, 2009, at 4:24 PM, cbdextre wrote:

    I think you are right ASM610, no bankrupcy, SIRIUS shs will go back to 30 cents in a few weeks.....needs a boost been a while!

    Lets see them $$$$$....

  • Report this Comment On February 12, 2009, at 4:33 PM, asm610 wrote:

    Mel Karmazin is a shrewd businessman if he's anything. He got screwed on the merger with the delays, but he will NEVER ever allow his legacy to be the Bankruptcy of Sirius! That you can be SURE of!

  • Report this Comment On February 12, 2009, at 4:34 PM, asm610 wrote:

    btw Rick,

    Nice job laying out the possibilities.

  • Report this Comment On February 12, 2009, at 4:40 PM, RadioMikey wrote:

    I know just a little about the biz. Siri is a legal monopoly and will be worth gillions. There are way more players out there than the names tossed around. No way will they let it go br. The re-negotiation of program/content contracts alone would be a disaster. This is a big ripe cherry to be plucked probably by a traditional broadcaster with huge bucks that hated and feared sat radio from the beginning....I'm buying more. If it goes zero, I'll have to wait a few more weeks to get another hdtv...

  • Report this Comment On February 12, 2009, at 4:54 PM, 1RedMaven wrote:

    Well Sirus ended up 34% today...even tho that percentage sounds good, they are only trading at a little $.07. Honestly, I think satellite radio is a real discretionary service that at this time can be easily cut off to save a little money.

    http://moneyisjustanidea.com

  • Report this Comment On February 12, 2009, at 4:57 PM, asm610 wrote:

    RadioMikey,

    Ditto on purchasing more. Better than a lottery ticket at these prices in my humble opinion. I just don't think a traditional broadcaster is the knight in shining armor here....but either way, glad you agree about the viability and the future. I'd look to those already mentioned, and maybe throw in Apple, Microsoft and Google as wild cards of an extreme nature!

  • Report this Comment On February 12, 2009, at 5:07 PM, basilnigel wrote:

    What is everyone talking about. It's Karmazin and his ego that has put Sirius into Bankruptcy. Just like Circuit City and it's policies which just turned consumers off. Stockholders who are losing there savings by investing in Sirius should file criminal charges against him and his management team. Remember they will be the only one's who will walk away with millions in there pockets!

  • Report this Comment On February 12, 2009, at 5:08 PM, asm610 wrote:

    1Red,

    SatRad is easy to cut as a new listener. Once you are hooked, you don't want to listen to terrestrial radio again. Similar to how many folks feel about cable TV...they will at most reduce the level of service, but a majority of subs DO NOT cut off the service entirely. I'm a life subscriber and a stockholder, and there are lots of us out there. Obviously numbers mean something to you, I suggest you take a look at SIRI's chart for the past couple of weeks, and pay particular attention to what happened and when, earlier this week!

  • Report this Comment On February 12, 2009, at 5:10 PM, therockdr3 wrote:

    As little know, when the merger was finished, one caveat in the deal was that XM's original debt will stay with XM Holdings INC.(about 2/3 of what is outstanding) The other 1/3 belongs to Sirius. So when the bankruptcy proceedings started, who was it for? Theoretically, XM Holdings can file for bankruptcy, erradicate some of the debt, keeping Sirius XM shareholds from being wiped out. But, this all depends on if Sirius XM can come up with the $175 million due next week. And if Sirius was able to transfer all of the programming over the their own satellites, they can sell Xm's portion of the satellites to one of the TV satellite companies for large cash amount. Mel might be more clever than we realize

  • Report this Comment On February 12, 2009, at 5:12 PM, asm610 wrote:

    basilnigel,

    I've got some swampland to sell you down in the Florida panhandle....it's totally buildable....really! I suggest you do some research, and pay attention to what I said in my second post. If SIRIUS goes bankrupt...would you agree his career is finished?

  • Report this Comment On February 12, 2009, at 5:12 PM, basilnigel wrote:

    I HAVE THE FEELING IT'S PROBABLY KARMAZIN AND HIS CRONIES THAT ARE POSTING THERE RIDICULOUS COMMENTS ABOUT BUYING MORE OF THE STOCK. JUST LIKE ENRON WHO TOLD EVERYONE TO BUY AND THEY SOLD. REMEMBER!

  • Report this Comment On February 12, 2009, at 5:14 PM, joeyjets wrote:

    I have little doubt that Mel has a plan and that is to see SIRI survive. SIRI is a big player in the game, no doubt. You gotta have faith.

  • Report this Comment On February 12, 2009, at 5:17 PM, asm610 wrote:

    basilnigel,

    That's it!...Brilliant!..Mel has nothing better to do than impart his wisdom on us about buying more shares. The FBI and SEC are on its way to his office as I post this thanks to your inside knowledge of his lies and deception on message boards! I suggest you go take your meds...and watch some TV!

  • Report this Comment On February 12, 2009, at 5:18 PM, basilnigel wrote:

    AMS610! I suggest you read my comment again. His career maybe finished but his pocket will be filled with Stockholders money. It is you who will try to sell us the money you foolishly invested in swampland Fla! Which you probably brought from Karmazin!

  • Report this Comment On February 12, 2009, at 5:27 PM, asm610 wrote:

    basilnigel,

    You couldn't be more wrong if you tried! I am not selling any of my SIRI stock, I am buying more if I can, in order to lower my cost average, and my holdings would not even pay for a new truck if liquidated. He has money to lose in Bankruptcy as well..look it up, he has several million shares, and he also has his reputation built over the years of being an astute businessman.....like him or hate him, he is not conspiring to take down shareholders...and as an aside...this Political and financial environment would have a FIELD DAY with him and anyone involved in any kind of shennanigans!

  • Report this Comment On February 12, 2009, at 5:29 PM, Cheese41 wrote:

    What if... Plan E; Mel puts XM holdings into bankruptcy only? XM debt is 2/3 or 2.1 billion to Sirius' 1.1 billion.

    Or... Plan F; Mel sells XM sats to dish, DirecTV, Verizon or At&t... 4 sats worth about 2 billion...

    Just a thought...

  • Report this Comment On February 12, 2009, at 5:30 PM, joeyjets wrote:

    asm610:

    I agree 100%. Mel's a pro. There is no gaf here.

  • Report this Comment On February 12, 2009, at 5:33 PM, asm610 wrote:

    Moron, Fool, I've been called far worse...but get off your high horse! It was you who posted this:

    " It's Karmazin and his ego that has put Sirius into Bankruptcy. Just like Circuit City and it's policies which just turned consumers off. Stockholders who are losing there savings by investing in Sirius should file criminal charges against him and his management team. Remember they will be the only one's who will walk away with millions in there pockets! "

    I would suggest that it was you who was condescending to those who had a different opinion than you! I will also humbly bow out of this battle of wits with an unarmed person!

  • Report this Comment On February 12, 2009, at 5:34 PM, greenwave3 wrote:

    Only one thing is for sure.... shareholders will be left with nothing.

  • Report this Comment On February 12, 2009, at 5:38 PM, asm610 wrote:

    Greenwave,

    If ...and it is possible...they go Bankrupt, that is correct. I just don't see how they are going Bankrupt now....it doesn't smell right based on the research and information that was out there long before this week! I remain Long SIRI.

  • Report this Comment On February 12, 2009, at 5:41 PM, asm610 wrote:

    joeyjets,

    Thanks and good luck!

  • Report this Comment On February 12, 2009, at 5:43 PM, asm610 wrote:

    Cheese41,

    You might have something there...other folks have brought that very possibility up today. I wouldn't be able to speak to the specifics...but boy would that be something!

  • Report this Comment On February 12, 2009, at 5:46 PM, basilnigel wrote:

    YES! Shareholders will be left with nothing and he may have million in shares but he still will walk away with millions in his pockets. I will end this with asm610 and see if he is still making these comments after Sirius files and we all lose because of Karamazin and his decisions that put Sirius into this situation. To not blame him for this mess and the huge debt created by his management and his EGO just is another insult to shareholders who were wrong in trusting him. .

  • Report this Comment On February 12, 2009, at 5:50 PM, asm610 wrote:

    Take a look at this folks:

    "Barclays analyst Vijay Jayant agreed that the talks are probably a negotiating ploy, and he went further, saying Sirius CEO Mel Karmazin likely approached Echostar because he is more apt to be able to stay on as CEO if Sirius partners with Liberty instead "

    This is either one DUMB analyst...or one irresponsible reporter...or perhaps both. It is a classic example of not believing everything you read, because it is filled with untruths!

  • Report this Comment On February 12, 2009, at 5:52 PM, asm610 wrote:

    basilnigel,

    hope you come back to apologize if you are wrong. Sorry for ticking you off.

  • Report this Comment On February 12, 2009, at 7:35 PM, YOWTF wrote:

    Something will happen other than Chapter 11.Maybe the on air talent will save it somehow(write a check Howard ect.), Even if that happens it will only put off the eventual takeover when the other 750 million due later this year.The infrastructure is there,the combined radios on the way,and the licencing noway it gets passed up.The lagging economy and car sales are going to make it take time to rebound,lets hope it's before the really good shows contracts are up.

  • Report this Comment On February 12, 2009, at 8:12 PM, CaptainFiveBaggr wrote:

    Warren Buffet & Bill Gates are in talks to takeover Sirius. its true. Buy Buy Buy....

    No, Not Really. For people who say "it will be at .30 cents in a few weeks"?. Please tell me you're not using real money. To just assume a 500% gain in 2 weeks is pretty ridiculous. I think the only thing known is that Sirius' stock future is UNKNOWN. I wouldn't bet Madoff's cash on this one. Its a crapshoot

  • Report this Comment On February 12, 2009, at 9:06 PM, RadioMikey wrote:

    Forget Wall Street and the current $$$ climate and who knows what KZ has on his mind and who he is talking to. In normal times we would be sparring about wheat futures while siri would be trading at 15+. The FCC/SEC/and about 87 members of the Senate aren't about to let this puppy go to sleep. If the fed wasn't totally committed to this "poster child" of future tech, the merger would have never happened...and the stockholders (lenders) will not suffer in the long run. Sure...It's a crazy gamble like e'thing else in my comotose portfolio...don't get me started on bank stocks...3rd grade math...8th grade hormones...post grad science...buy more siri...

  • Report this Comment On February 12, 2009, at 9:51 PM, windblown wrote:

    Great comments -- hoping for the 500% increase. But currently I am reminded of Will Rodgers's "return of my money vs return on my money"

  • Report this Comment On February 12, 2009, at 10:22 PM, basilnigel wrote:

    This is and will be my last comment! It's Amazing, this stock was at one time over $5.00 a share and truly a company that was clearly the leader in it's developed industry. To see it drop to less than 10 cents a share well below the market recession and NOT place the blame on poor/very bad management and Karmazin is crazy. To just praise what he has done to this excellent concept to the point of running it into bankruptcy is not only a reality check for those who blame everything on the economy and not him and his ego makes me wonder if and when Sirius files. When you understand that the billons he created in debt was due to and only do to his poor poor decisions at the cost shareholders who invested there hard earned money. AMAZING

  • Report this Comment On February 12, 2009, at 10:48 PM, gopanky wrote:

    buying 5000 right this second........gooooo siriiiii ,cant live without it.

  • Report this Comment On February 13, 2009, at 1:23 AM, ByrneShill wrote:

    Chapter 11 isn't the only way SIRI shareholders can end up holding an empty bag.

    I say it's either chapter 1 or the suitor gets away with most of the company. So either the shareholders are left holding an empty bag or an almost empty bag. Either way they are screwed.

  • Report this Comment On February 13, 2009, at 7:00 AM, Adam1226 wrote:

    YOWFF--

    Tell me you're kidding about on-air talent coming to the rescue...never happen.

  • Report this Comment On February 13, 2009, at 7:39 AM, arcetype wrote:

    basilnigel-

    It may be true that Mel K has an ego that doesn't allow the best decisions, but most of us don't know him - just his press. He has a lot of his own money in the stock which I doubt he's gonna let go without a fight. He's done a few things right, so give him a little credit. You may just be having a bad day and taking it out on this board.

    The auto industry's dive has done much of the damage to SIRI stock but you don't mention that aspect. The truth may be somewhere in the middle. I doubt there will be a bankruptcy - there are too many interested parties waiting in the wings to take advantage of the situation. And, there are too many other options ahead for Sirius XM to make money based on upcoming tech advances.

  • Report this Comment On February 13, 2009, at 8:50 AM, asm610 wrote:

    basilnigel,

    The biggest reason for the current price was the length of the merger process...which effectively diluted the synergies the merger created, and allowed further erosion of COH based on the costs of running 2 seperate companies. It's not the only reason...just a big piece of the puzzle as to why this stock has had issues. If you understood that, you would also understand why Mel has done some of the things he did after the merger was approved, and had to effectively swallow some poison while trying to find the antidote all this time along with us shareholders. A very complicated financial deal with major ramifications was made even more so by the government.....sound familiar ?

  • Report this Comment On February 13, 2009, at 10:47 AM, marlintrdg wrote:

    This service was always FAR too expensive, very good idea, but ridiculous costly.

  • Report this Comment On February 14, 2009, at 4:07 AM, work4ever wrote:

    Come on!!!!!!!!!!!!!!!!!! Pay radio?????????????? I have plenty of radios in my house, car, garage, computer, motorcycle, and they are all FREE!!!!!!!!!!!!!!!!!!!!!!! Oh wait, then there is my 30 Gig MP3 player that I filled with all my CD's for FREE!!!!!!!!!!!!!!!!!!!!! For God sakes, LET PAY RADIO BURN AND DIE!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • Report this Comment On February 14, 2009, at 8:46 AM, fastman01 wrote:

    In January 2006 I bought SIRI @ $6.45. (2,000 shares) not because I was a fool, but rather because I just knew that SAT RAD was a winner.

    I'd missed the cable TV revolution many years before, and wasn't about to miss another chance to get in on a ground floor.

    XM was trading for double

    SIRI at that time, and they were the only two players.

    I didn't know then what I don't know now, about how to "properly" evaluate a stocks value.

    But, @ $6.45 each, in retrospect, I was getting in not on the ground floor, but the ceiling.

    I do remember reading both companies financial info, and neither of them was making any money.

    Both also had debt, but the whole SAT RAD concept was, and is, still a newcomer in "broadcasting", so I bought the shares.

    I was sick and tired of the traditional commercial radio medium, and I just knew that millions more felt the same.

    It turns out that millions of us did feel the same way about needing a new medium, and even the car companies used SIRI & XM as selling points.

    Naturally, shortly after I bought the stock it began going down. I pinned my hopes on the merger of the only two such companies, and waited while the FCC took 1 -1/2 years to finally approve the merger.

    Shares kept right on falling.

    But remember, I just knew I was right. In other words, I was in that stock for all the wrong reasons.

    In December 2008, I dumped 1,000 shares for $113.50 total, and still have 1,000 shares.

    All that get's me is a long term loss of -$6,336.50 that my CPA can deal with.

    I suppose I could buy back in on 2/17/2009 for 10 cents; however, I think I'll just keep my 1,000 shares, and wait and see what happens.

    I think that SIRI XM will recover, but when is anybodies guess.

    However it recovers, will depend on several factors. But needing $175M in a week isn't anything new to both companies management.

    Both companies made mistakes, no doubts about it, and were overly ambitious, but, the SAT RAT industry is still in its infancy, so mistakes were bound to happen.

    It will need to replace satellites, and repair equipment, sometime in the future, and they'll face another "need $175M in a week" again, and again, and they'll come up with the money, again and again.

    Some rather nasty person posted in this thread "that only a moron would buy" the stock, and I disagree. Obviously my original 2,000 shares purchase was a blunder, but for 10 cents, who's kidding whom? This is no Enron type situation, and it's not a Ponzi scheme either.

    What it is, in this fools opinion, is an opportunity to make some money, and if you lose, how much have you lost, $100?

    I've spilled more than that in 10 seconds when I dropped an expensive bottle of wine.

    --=Fastman=--

  • Report this Comment On February 14, 2009, at 10:13 AM, asm610 wrote:

    fastman01,

    best of luck to you. I think many folks are about to be surprised over the course of next week

  • Report this Comment On February 15, 2009, at 4:24 AM, IIcx wrote:

    Maybe it's just me but with the recent stock issue to cover a portion of the debt, the shares are so diluted that at some point a 1:1000 split is likely.

    Sirius has already announced that they may declare Chapter 11 as soon as Tuesday. I'd wait for some solid news but...

  • Report this Comment On February 15, 2009, at 5:55 AM, AKBigO wrote:

    Maybe the bankruptcy announcement was just to get Ergen on for their backs for long enough to find another investor......

    I think Karmazin will do what needs to be done to save this company. The 2Mil shares he purchased in Aug08 for $2.75Mil, that's now worth $200K.....I'd definitely say he has major interest as a shareholder!!!!

    If he can get it back to $1.37......that'd put me at 1100% return.....big smiles. I think the risk is worth it for the possible returns. Even if it only recovers to a portion of what it traded for earlier this year....it still leaves the chance for some nice gains.

    I'm gambling on this one....

  • Report this Comment On February 15, 2009, at 9:12 AM, asm610 wrote:

    llcx.

    ,

    Agree dilution is an issue....however, it is not insurmountable like Bk for the common shareholders, and the common shareholder gave approval for a rev split of up to 50:1, I'm sure many would rather not see that either....but then.....no guts no glory. Some have been purchasing more shares at these low as bk levels to hedge against the rev split....those folks seem to be sitting pretty well right now....if you can sit well with a .10 cent stock that showed you nothing but loss since the merger and can do some research....you just might make some cash when its over....and isn't that what every fool wants to do....and why we come to sites like this.

  • Report this Comment On February 15, 2009, at 9:22 AM, asm610 wrote:

    AKBigO,

    Sure Mel wants a return on his investment....we all do, but the bigger picture for him is his reputation and legacy. As a major executive in media for decades...would you want your legacy to be BK a company with so much promise? Not only would it ruin his career....but it would rip apart his reputation and he would be looked at as a failure for the rest of his life. Mel is no loser.....he's a winner.If you ever took notice.....one of the things he has always said is that the "savy investors know"..it's not just a line, it's a fact! Those who do more than just read headlines and take them for gospel will always fare much better....and expose some total BS on occasion. No BK announcement this week in my foolish opinion.....and I hold a position in stock ....one which I plan to keep a large part of long term.

  • Report this Comment On February 15, 2009, at 9:33 AM, mikejw wrote:

    I have heard the same no BK with another company in a similar situation....called Global Crossing. The CEO John Legere even said "We are not in danger of bankruptcy." And guess what? They went bankrupt. XM/Sirius got caught up in a bad financial situation at the worst of times. Sometimes good companies do go bankrupt. Mel K needs to put his ego aside and just face that he is going to lose control one way or another. Either by selling a part of his company to Liberty or Echostar; or going BK. Buying shares in XM/Sirius right now is like throwing money into a burning barrel.

    Just my two cents and I know asm610 will pound the table saying that the shares are worth something.

    Only time will tell and odds favor the equities to be worthless.

    "Heads you lose, tails you lose a lot"

    mikejw

  • Report this Comment On February 15, 2009, at 10:00 AM, asm610 wrote:

    mikejw,

    First...Mel has not said SIRI will never go Bankrupt...but it won't happen without a fight. Yes..SIRIUS did get caught up in a terrible economic situation for the entire country..when it needs to rework some financial issues the most. We will find out this week if Mel is going to let the company go BK...or if it survives.I could go on about Echostar and Liberty..and which I prefer.....but that is another discussion for another day. So long as SIRI comes out of this situation with some good terms.....and the commons aren't wiped out that's all that matters. My gut tells me it will...and that Mel is so silent in order to get the best terms for the new situation he is negotiating...without giving ANYONE the opportunity to take advantage in a negative way.

  • Report this Comment On February 15, 2009, at 10:54 AM, IIcx wrote:

    good points asm610 - I'm new to Motley Fool and still exploring the principals.

    Based on my experience, reverse splits are typically used to make a stock look more valuable then it actually is and to prevent delisting from an exchange.

    I'm really struck by the passion Sirius shareholders bring to the table but investors like fastman01 could be very disappointed after holding a position for so long.

    Sirius in it's current state isn't a "good" long term investment -- I think this is one of the Fool principals. But, it is an interesting trade at these levels on news.

    The risk of BK reorganization is extremely high. If you feel strongly about he stock opportunity, won't it make more sense to buy preferred shares?

  • Report this Comment On February 18, 2009, at 10:42 AM, fastman01 wrote:

    "I'm really struck by the passion Sirius shareholders bring to the table but investors like fastman01 could be very disappointed after holding a position for so long."

    Key word, "could"? Heck, I was disappointed within a few months back in 2006 after I'd bought the SIRI stock.

    But at this point, after dumping 1,000 shares for $0.13 each in 2008, I might as well just hang on to the other 1,000 shares.

    Liberty is investing a few hundred million I see, so until their next payment date arrives (April?), maybe SIRI XM can get it's act together enough to raise share values.

    It was my first stock purchase, but a rather painful lesson was learned: Don't let my emotions (gut feelings) get involved in evaluating a stock.

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