One of the takeaways from yesterday's conference call is that Sirius XM Radio (Nasdaq: SIRI) has no intention of letting Nasdaq OMX Group (Nasdaq: NDAQ) show it the door.
CEO Mel Karmazin hopes that it doesn't get to that. The stock needs to close above the $1 mark for a few more days to get off of the exchange's watch list. If it should happen to buckle -- or fall out of compliance in the future -- Karmazin has a reverse split in his pocket. He can also appeal the move, buying the satellite-radio operator a little time.
Karmazin pointed out yesterday that he won't entertain the reverse if Sirius XM is in compliance, but it's hard to win institutional ownership with a $1 share price. Given the company's present enterprise value of roughly $10 billion -- after considering Liberty Capital's (Nasdaq: LCAPA) 40% stake and the company's debt -- it will have to be valued as a $19 billion company to justify a price of $2. There are certainly plenty of potential catalysts in the coming years that may make that feasible, but the current growth rate and low margins make it more likely that investors will be trading in the vicinity of a buck for some time.
Reverse splits aren't fatal. Companies including priceline.com (Nasdaq: PCLN) and AIG (NYSE: AIG) have overcome the humbling procedure. Still, there are many shareholders who are hesitant to support the reverse, fearing that it will attract more short interest than institutional ownership.
I have no beef with a reverse split as a way to grant the stock a more marketable price, but I don't think it's going to be necessary even if Sirius XM fails to close above the $1 mark through early next week.
Why? I dare Nasdaq OMX to delist Sirius XM! Would the exchange really boot a stock that is routinely atop its most actives list? Could Nasdaq afford to alienate so many retail investors, validating pink sheets in the process?
The market may gasp if Sirius XM closes below the $1 mark between now and Tuesday, but Sirius XM doesn't need to flinch. If push comes to shove, I would be shocked if Nasdaq didn't revisit its listing requirements to consider a stock's actual market cap or enterprise value before being kicked off the exchange.
Now isn't the right time for any exchange to dismiss volume.
What would it to take for Sirius XM to be valued at $2? Share your thoughts in the comment box below.
