For a brief moment in yesterday's trading, shares of Sirius XM Radio (Nasdaq: SIRI) crept above the $1 mark.

A shiny silver dollar may not seem like much outside of Mickey D's menu, but it's an important milestone for the satellite-radio operator. It is meeting with NASDAQ OMX Group (Nasdaq: NDAQ) later this month, specifically because it's in violation of the exchange's listing requirement that stocks maintain a price above $1 per share.

To regain compliance, Sirius XM has to close with a bid price above $1 for 10 consecutive trading days. Yesterday doesn't count, since it did not finish off the day to the left of the decimal point. However, it's the first time in over a month that Sirius XM has traded above the mark. It fell two days short of nailing the 10-day streak during that run.

This month's meeting promises to be interesting. It's really a case of much ado about bluffing from both sides. NASDAQ isn't going to boot one of its most actively traded stocks from the exchange, and Sirius XM may very well go the reverse split route that would rectify this situation even if it's able to get back over a buck to meet NASDAQ's requirement.

A reverse split is a touchy subject in the Sirius XM camp, with vocal opinions on both sides.

"We don't want or need it," wrote southernbeachguy as a comment after I closed an article by asking if the split was a good idea. "Those that want a reverse split are either Bashers or haven't been with Sirius [long enough] to know what is going on."

"It needs a reverse split due to lack of institutional investors," counters WoodyDog1400. "Those not familiar with the stock do not realize a split is not a bad thing if the company is a good one and it gets timed correctly with earnings report."

I'm in the latter camp. There is more to gain from the zero sum game of, say -- becoming a $20 stock with every 20 shares being exchanged for a single new share -- than there is to lose. Opening the investment to more institutions and apprehensive individual investors is worth shaking out some of the speculators.

At the end of the day, someone who argues that a reverse split would ultimately send the shares lower is someone who -- deep down inside -- may feel that the stock is presently overvalued.

What are the arguments against the reverse?

  • It will make the stock easier to short? Well, Sirius XM already has a substantial short position. And every short sale is an eventual purchase when the bears cover.
  • Reverse splits historically fail? This is true, because desperate companies resort to reverse splits on the way down. They were fading companies anyway. Sirius XM isn't going away. Three of last year's most prolific reverses -- AIG (NYSE: AIG), Steak n Shake (NYSE: SNS), and Coeur d'AleneMines (NYSE: CDE) -- are trading higher after their splits.

Discount broker E*TRADE Financial (Nasdaq: ETFC) announced that it would ask shareholders to approve a 1-for-10 reverse split two weeks ago. It is trading sharply higher today.

The stigma of reverse splits is fading, and the evidence is everywhere.

Sirius CEO Mel Karmazin has nearly three months before the right to execute Sirius XM's shareholder-approved split expires. He seems to be pocketing it only if it means sparing his company from a delisting, and will just ask shareholders to approve it again.

Why?

I have yet to hear a single persuasive argument detailing why Sirius XM will be worth less after a reverse if its fundamentals continue to improve as Karmazin has already projected. This is an invitation for split naysayers to let me have it in the comment box below. 

The buck chasing and compliance dancing is getting old.

Really. Why would a reverse split be bad for Sirius XM? Share your thoughts in the comment box below.

Nasdaq OMX Group is a Motley Fool Inside Value pick. Motley Fool Options has recommended a write covered calls position on Nasdaq OMX Group. The Fool owns shares of Steak n Shake. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the stocks in this article. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.