A date has been set for Sirius XM Radio (Nasdaq: SIRI ) to request more time to meet NASDAQ OMX Group's (Nasdaq: NDAQ ) listing requirements.
Come April 29, the satellite-radio giant will plead its case after failing to close with a bid above $1 for 10 consecutive trading days.
Let's hope that Sirius XM does more than simply ask for the maximum 180-day extension, a move that wouldn't change a thing beyond tapping the snooze bar until mid-September.
CEO Mel Karmazin has already ranted publicly about the compliance requirements. The exchange demands a minimum share price without factoring in a company's market cap or enterprise value. Sirius XM has 3.9 billion shares outstanding; that figure graduates to 6.5 billion once you factor in Liberty Capital's (Nasdaq: LCAPA ) 40% preferred-share stake, which will begin to factor into the income statement once Sirius XM turns consistently profitable.
Can Sirius XM simply engage in a reverse split and make the delisting chatter go away? Yes, but the fact that only a zero-sum solution can make things square is just a bigger reason for Sirius XM to contest the process.
"We believe that there should be a dual test," Karmazin argued last summer, suggesting that something in the range of a $500 million market cap should exclude a stock from being delisted if it falls below the $1 mark.
Price, after all, is just a number.
"Warren Buffett is able to have a stock that is trading at over $100,000 a share," he went on to argue at the time. "We think that our share price is more friendly to investors than a $100,000 share price -- but again, that's not within our control."
Picking on Buffett wasn't Karmazin's finest moment. Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) isn't a NASDAQ-listed stock, though NYSE Euronext (NYSE: NYX ) has similar listing criteria. Berkshire Hathaway also comes in a slightly more accessible B-share flavor. However, Karmazin does have a point about how a company with a revenue run rate of $2.7 billion annually is somehow unfit to trade on NASDAQ.
We all know that the exchange is unlikely to boot Sirius XM. The satellite radio provider routinely tops NASDAQ's most actively traded companies. Forcing it into a reverse split -- even if some of us feel that might be in the media giant's best interests -- would also dry up the exchange's trading volume on a per-share basis.
The reverse-split clock is also ticking on Sirius XM. It has until the end of June to go that route. The company can simply ask shareholders to approve the maneuver for another year, but that's not a given now, that the stock is trading substantially higher than it was a year ago.
Sirius XM's best bet next month isn't to ask for more time. Instead, Karmazin needs to be bold enough to request that the exchange update its listing requirements. He needs to be as passionate about this crusade as Overstock.com's (Nasdaq: OSTK ) Patrick Byrne was about naked short selling. Both NASDAQ and Sirius XM have plenty to lose if the stock gets axed from the exchange, and that leverage cuts both ways. This is no time for Karmazin to be a shrinking violet -- assuming he ever could.
What should Sirius XM do at next month's meeting? Share your thoughts in the comment box below.
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