What's the dollar value of 60 months' worth of jokes about Ba Ba Booey's teeth? How about five years' lamentations about a DJ's private parts? Semi-naked strippers spanked on air? Angry, drunken midgets? Obscene phone calls?
To judge by pre-market trading, well more than $1 billion dollars. In the saner moments after the opening bell, only half a billion. What am I talking about? The market cap of Sirius Satellite Radio (NASDAQ:SIRI), which announced that it had finally inked a long-rumored deal with Howard Stern that will take him away from Viacom's (NYSE:VIA) Infinity Broadcasting. Stern has been threatening to leave for sat radio for a long time, especially after Clear Channel Communications (NYSE:CCU) dropped him from several stations earlier this year.
Attempting to keep investor enthusiasm in check has never been one of Sirius management's strong suits, but calling this "the most important deal in the history of radio" is self-deluded BS of the first degree. C'mon, folks. When Stern calls himself "King of all Media," you know that he knows the hyperbole is funny. The key to humor is self-awareness -- unless you want people laughing at you.
But there's a lot that suggests Sirius management has trouble discriminating between hype and reality. A brief glimpse of its deteriorating financials is ample proof.
Before we turn to planet Earth, let me applaud. Nice going, Sirius. Those who are familiar with my previous takes on Sirius and larger competitor XM Satellite Radio (NASDAQ:XMSR) might be surprised by that acknowledgement. But, hey, I like Howard Stern. I am in no way above making, or laughing at, a good doody gag. Sirius' good product will be improved when "Miss America" himself finally hits the orbital airwaves -- well over a year from now. NPR, NFL, the NRA, Howard Stern, and Pamela Anderson? That's fun for the whole family.
But this is about the stock. There's no question about that situation: It's not worth it.
Anyone willing to pay up for this stock today is doing more hoping than thinking -- or maybe just swapping sardines. As we've pointed out in this space many times, despite deals with Ford (NYSE:F), DaimlerChrysler (NYSE:DCX), and RadioShack (NYSE:RSH), Sirius was already horribly overvalued by any metric or feasible growth model. The Stern deal will cost $100 million per year -- adding about 30% to operating costs -- meaning Sirius will need to add 1 million subscribers to break even. As of last quarter, the firm had less than half that many paying customers. And there's evidence that the public's appetite for sat radio isn't so voracious as expected. XM's recent tally was below analysts' expectations.
Those lucky enough to sell their Sirius to the overagitated suckers during the next few days may be sitting pretty. But anyone who holds this for the long term had better hope that future investors -- the ones who will be paying for their shares -- don't care about minor issues like earnings or return on investment.
For related Foolishness:
- Stock or sardine? Know which one you're buying.
- Be wary, but watch for models that explode.
- Fools duel over sat rad's future.
No, Seth Jayson is not shorting Sirius. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here.
