After all of the fireworks earlier this month, it was a rather uneventful week for the only satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI ) matched the market's decline, shedding 2% of its value on the week.
What happened on the Sirius XM front this past week? Well, the Nasdaq released its latest tally of shorting interest on its stocks. Sirius XM now has as many shares sold short as it has had all year.
However, the big news is that there was no news. There were no moves by Liberty Media (NASDAQ: STRZA ) . There was no launch of the personalized radio service that Sirius XM has been hoping to launch during the second half of 2012.
Let's take a closer look.
There were nearly 370.4 million shares sold short of Sirius XM as of Dec. 14. There haven't been more bearish wagers betting against the media giant all year. Sure,
Sirius XM has always been a naysayer magnet. There were 301.4 million shares sold short when the year began, and short interest on the stock has never below 259 million shares at any point in 2012. However, 370.4 million as of mid-December is a record.
There are two ways to look at the data. Pessimists will argue that it's a strong indicator that speculators are betting against the company. That may be true, but the shorts have been wrong over the past four years.
The other way to interpret the heavy shorting activity is that it sets up the stage for a bullish short squeeze rally. That's what the optimists are hoping for.
It's easy to see why some investors may be skeptical. Liberty Media has already boosted its stake to 49.8% of the company. There's less buying in store for the media conglomerate now. When it receives regulatory clearance to take majority control, all it needs to do is push its stake above 50%.
However, Sirius XM has defied bigger odds before and still managed to rise above.
Give me Liberty
Where do we go from here? Liberty Media is still waiting for approval to take a majority stake in Sirius XM. After that it will probably spin off its stake to its shareholders in a tax-advantaged transaction.
Liberty Media's John Malone has telegraphed his intentions. "If I'm in control, I like to have separate companies, run independently, with public shareholders investing in that business," he said in a statement this summer. "There is no question eventually Sirius will be an independent company. The question is, in what time frame and in what circumstances?"
It's just a matter of time at this point.
The Pandora killer isn't ready yet
When Sirius XM introduced on-demand streaming this summer, then-CEO Mel Karmazin pointed to personalized radio as its next major launch for 2012. Even early last month -- during the company's third-quarter call -- Sirius XM was still pointing to the second half of the year for its platform that would rival Pandora (NYSE: P ) .
Sirius XM won't be alone when it happens. Spotify and Clear Channel's (NASDAQOTH: IHRT ) iHeartRadio have introduced similar music discovery features to their popular streaming services. Several reports in recent weeks also say Apple (NASDAQ: AAPL ) is in talks with the major record labels to introduce its own streaming service at some point in 2013.
Pandora's success has inspired the ultimate compliment in the form of copycats. Sirius XM may find the playing field crowded, but it does have an advantage in its 20 million-plus receiver-based subscribers who would be charged only $3.50 a month more for access to Sirius XM's streaming service. That's a bargain compared with what, say, Spotify is charging for premium ad-free access.
With 2012 winding down, we may not see this service introduced until 2013. Investors may begin to wonder whether it's not ready, or if Sirius XM is merely looking to buy out Pandora. The latter scenario doesn't seem likely, so hopefully Sirius XM will provide an update soon as to where that stands.
Sirius XM has been one of the market's biggest winners since bottoming out three years ago, but there's still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.