The race to the dollar bill is over.
Shares of Sirius XM Radio (NASDAQ:SIRI) hit the $1 mark shortly after this morning's open. A buck may not seem like much, but this is the first time in 17 months that the satellite radio operator's stock has reached such lofty highs.
The $1 mark became an essential target for Sirius XM after it received a delisting notice last year. It has until mid-March to comply by closing above the $1 mark for 10 consecutive trading days.
That may be easier said than done, given the wild price swings that have been typical with Sirius XM's volatile stock. I question whether Sirius XM will need to hold its pose over the next two weeks.
When pepper spray maker Mace Security International (NASDAQ:MACE) traded above $1 for 10 straight days last month, that was enough to satisfy Nasdaq's listing requirements. However, Mace is a puny $15 million company. Sirius XM commands a market cap of roughly $4 billion, which grows to more than $6 billion when you tack on the 40% preferred share stake owned by Liberty Capital (NASDAQ:LCAPA). Scoop on the approximately $3 billion in debt, and the enterprise value creeps up to more than $9 billion.
Can Nasdaq really afford to cut ties with a company that the market deems to be worth nearly $10 billion because its share price is too small?
It only helps Sirius XM's case that daily trading volume on the stock has averaged close to 40 million shares in recent months. Cutting Sirius XM loose on principle may be bad for many of Nasdaq OMX Group (NASDAQ:NDAQ) shareholders.
Just as "age is only a number," the same can be said of a stock price.
A reverse split has been sitting in the Sirius XM playbook since last year, just like a fire extinguisher behind an "In Case of Emergency, Break Glass" box. CEO Mel Karmazin will use it if he has to, though it's silly that something as zero-sum as a reverse stock split would be all it takes to bring Sirius XM back into exchange compliance.
During the company's second-quarter conference call last year, Sirius XM pointed out the mindless hoop-jumping the Nasdaq pricing restriction requires. The company even called out Warren Buffett, pointing out that the pricey Class A shares of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) are less shareholder-friendly than the easily accessible Sirius XM stock.
I see nothing wrong with a reverse split, especially for a company with billions of shares outstanding. I actually still think a reverse would be in Sirius XM's long-term interest -- regardless of how the next two weeks play out -- but a listing requirement that can be circumvented by the zero-sum switcheroo is nuts.
Hopefully Sirius XM stays perched above the $1 mark. After all of the positive developments over the past year, it deserves it. However, it would still be an interesting game of chicken between Sirius XM and Nasdaq if it falls through.
It's a game that Sirius XM will inevitably win.
Now that Sirius XM has hit the $1 mark, what will it hit next: $2 or $0.50? Share your thoughts in the comment box below.
