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Wednesday, March 24, 2010


For the second time, Sirius XM has received notice from Nasdaq that their stock could be delisted if it does not remain above $1 per share for 30 consecutive days. In a way I find myself puzzled, considering that the company's board has already approved a reverse stock split to hike the price up. The company says it will do what they feel is best for the shareholders. My great wonder is what good delisting would do for the shareholders. Part of the thought is that if, for example, the company were to suddenly decide it may be better positioned as a private company—this is conjecture entirely, the company has not spoken a word about such a thing—then presumably they would have to issue a tender offer to current shareholders. In my own case, considering my cost basis, which I will not disclose, I'd lose an enormous amount of money on my position. I have a suspicion that a great many others would stand to be in the same boat. Being traded on the OTCBB isn't something I think would bode well for the stock either.

Sure. It's an investment. There are no guarantees. My cost basis is not the concern of the board. Nor is the cost basis of any other investor. I could have averaged down. Perhaps I even should have averaged down. The prices certainly are far below my cost basis at this current price point. And obviously the fact that I have not sold my shares, despite all that's happened with this stock over the years, indicates that I believe the stock is undervalued. In my mind it's obvious to me that the company has a future. That's why I've kept my money put up to this point.

So, what's in my best interest, as much as I don't like reverse stock splits, I think it is to do exactly that. Reverse split the shares and put the share price around $5. It's not to say that it solves the issues the company has that has managed to drag the share price down and keep it down. But it would create value, and it would keep the stock trading on the Nasdaq. And let's face it. Even though a reverse stock split may meet with some bad press because it's considered a sign of weakness within the company, but so would a delisting from the Nasdaq do that.

My own thoughts are that the current price is part of the reason the stock is having trouble. Investors and traders don't like stocks that trade at such low prices. It signals to them that there are deep problems, and it invariably increases the risk to the investor's investment.

But there are positives here. The company had some help, and some interest, from Liberty Media a while back, and I think it has used the money well. Car sales have increased, and this has helped to allow them a little bit more room for growing their subscriber base. They've expanded their business a bit outside just cars. And the company was finally able to show a profit in the 4th quarter after a year of losses. These are all good things. These are things that should have allowed the stock to trade above $1 for longer than it did after it released earnings.

I think, as painful as it is, a reverse stock split is the best answer shareholders can get right now. If the company is solid, and I think that it is, then the reverse stock split can simply be considered to be priced into the stock, and shouldn't be a negative factor in the future of the company.


Religion Is Not Necessary


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