Sirius XM Holdings Inc

NASDAQ:SIRIUnited States

Andrew Bary Sirius XM Holdings stock has taken off from a multiyear low in the past month because of an apparent short squeeze ahead of its coming merger with Liberty Sirius XM Holdings. The deal is expected to close soon, likely this quarter, so the approximately 8.3 shares of Sirius XM that investors are due to get for each Liberty Sirius XM share should be trading near the price of the latter stock. But that isn't happening. Sirius XM stock has risen 55% since June 10, lifting the premium of those 8.3 Sirius XM shares above Liberty Sirius XM to nearly 30% from less than 2% a month ago. The value of that package is now about $33 a share, a big premium to the current Liberty Sirius XM stock price of about $23. Given those moves, Liberty Sirius XM now appears to be the better bet for investors bullish on the prospects for Sirius XM, the satellite radio company. Here are some of the key numbers. Sirius XM stock was up 1.4% Tuesday to $3.95. It has gained 55% since its June 10 low of $2.53, rising 40% since June 30. The stock is still down over 25% this year, having started 2024 above $5 a share. Liberty Sirius XM Class A shares, which were up 0.9% Tuesday to $23.28, have risen 11% since June 10, when Sirius XM hit bottom. The deal is due to close in the current quarter, perhaps as early as this month. "The parties are working diligently to complete the Transactions as soon as practicable," Sirius XM said in a securities filing in mid June. "We expect the closing to occur in the third quarter of 2024." It wouldn't be the first time a short squeeze has lifted Sirius XM stock. It happened in the summer of 2023, when the stock briefly hit nearly $8 a share before sinking back toward $5. While Sirius XM has about 3.8 billion shares outstanding, Liberty Sirius XM holds about 3.2 billion, or 84%. That leaves a float -- stock that is available for trading -- of about 600 million shares. In late June, short interest in Sirius XM, the amount of stock borrowed to make bets that the price might decline, was 156 million shares, or about 27% of the float, Bloomberg data show. That is a high ratio of short interest to float. A high short-interest ratio can lead to a short squeeze because limited availability of stock to borrow can pressure traders to close out existing short positions. It could make sense for investors to buy Liberty Sirius XM and sell short Sirius XM to capitalize on the spread between the stocks, but that doesn't appear practical at the moment. One analyst told Barron's that the borrowing costs for shorts has spiked lately in Sirius XM, making it very costly to short. The borrowing cost is now above 100% annually if investors can find stock, one individual investor said, based on what he is hearing from a leading firm. As it stands, investors enamored of Sirius XM ought to consider Liberty Sirius XM instead. If the merger closed at current prices, holders of Liberty Sirius XM's stock would be able to get Sirius XM stock for under $3 a share, compared with a current price of around $4. This is based on approximately 8.3 Sirius XM shares for each $23.28 Liberty Sirius XM share. One potential problem with this strategy is that Sirius XM stock now may be artificially inflated by the apparent short squeeze. It could fall back to around $3 once the Liberty Sirius deal is completed and the float in Sirius XM stock expands dramatically. The "true" price of Sirius XM could be what is now embedded in Liberty Sirius stock. Sirius XM now trades for around nine times projected 2024 earnings before interest, taxes, depreciation and amortization based on its enterprise value, defined as equity market value plus net debt. That is a premium to cable companies such as Comcast. A valuation of seven or eight times, in line with cable, could be more appropriate for Sirius XM given the lack of growth at the company and falling subscribership for satellite radio. There is another wrinkle. Sirius XM plans a one-for-10 reverse stock split in conjunction with the combination with the Liberty Sirius merger. That will shrink its share count and lift its stock price. Liberty Sirius XM holders will get about 0.83 shares of the new post-split stock in the deal (10% of 8.3), Barron's estimates. Corrections & Amplifications Holders of Liberty Sirius XM will get approximately 8.3 shares of Sirius XM for each Liberty Sirius share they hold. An earlier version of this article misstated the ratio as 8.4 to one. Write to Andrew Bary at andrew.bary@barrons.com This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires July 17, 2024 10:16 ET (14:16 GMT)

Andrew Bary Sirius XM Holdings stock has surged from a multiyear low in the past month because of an apparent short squeeze ahead of its coming merger with Liberty Sirius XM Holdings. The deal is expected to close soon, likely this quarter, so the 8.4 shares of Sirius XM that investors are due to get for each Liberty Sirius XM share should be trading near the price of the latter stock. But that isn't happening. Sirius XM stock has risen 55% since June 10, lifting the premium of those 8.3 Sirius XM shares above Liberty Sirius XM to nearly 30% from less than 2% a month ago. The value of that package is now about $33 a share, a big premium to the current Liberty Sirius XM stock price of about $23. Given those moves, Liberty Sirius XM now appears to be the better bet for investors bullish on the prospects for Sirius XM, the satellite radio company. Here are some of the key numbers. Sirius XM stock was up 1.4% Tuesday to $3.95. It has gained 55% since its June 10 low of $2.53, rising 40% since June 30. The stock is still down over 25% this year, having started 2024 above $5 a share. Liberty Sirius XM Class A shares, which were up 0.9% Tuesday to $23.28, have risen 11% since June 10, when Sirius XM hit bottom. The deal is due to close in the current quarter, perhaps as early as this month. "The parties are working diligently to complete the Transactions as soon as practicable," Sirius XM said in a securities filing in mid June. "We expect the closing to occur in the third quarter of 2024." It wouldn't be the first time a short squeeze has lifted Sirius XM stock. It happened in the summer of 2023, when the stock briefly hit nearly $8 a share before sinking back toward $5. While Sirius XM has about 3.8 billion shares outstanding, Liberty Sirius XM holds about 3.2 billion, or 84%. That leaves a float -- stock that is available for trading -- of about 600 million shares. In late June, short interest in Sirius XM, the amount of stock borrowed to make bets that the price might decline, was 156 million shares, or about 27% of the float, Bloomberg data show. That is a high ratio of short interest to float. A high short-interest ratio can lead to a short squeeze because limited availability of stock to borrow can pressure traders to close out existing short positions. It could make sense for investors to buy Liberty Sirius XM and sell short Sirius XM to capitalize on the spread between the stocks, but that doesn't appear practical at the moment. One analyst told Barron's that the borrowing costs for shorts has spiked lately in Sirius XM, making it very costly to short. The borrowing cost is now above 100% annually if investors can find stock, one individual investor said, based on what he is hearing from a leading firm. As it stands, investors enamored of Sirius XM ought to consider Liberty Sirius XM instead. If the merger closed at current prices, holders of Liberty Sirius XM's stock would be able to get Sirius XM stock for under $3 a share, compared with a current price of around $4. This is based on 8.4 Sirius XM shares for each $23.28 Liberty Sirius XM share. One potential problem with this strategy is that Sirius XM stock now may be artificially inflated by the apparent short squeeze. It could fall back to around $3 once the Liberty Sirius deal is completed and the float in Sirius XM stock expands dramatically. The "true" price of Sirius XM could be what is now embedded in Liberty Sirius stock. Sirius XM now trades for around nine times projected 2024 earnings before interest, taxes, depreciation and amortization based on its enterprise value, defined as equity market value plus net debt. That is a premium to cable companies such as Comcast. A valuation of seven or eight times, in line with cable, could be more appropriate for Sirius XM given the lack of growth at the company and falling subscribership for satellite radio. There is another wrinkle. Sirius XM plans a one-for-10 reverse stock split in conjunction with the combination with the Liberty Sirius merger. That will shrink its share count and lift its stock price. Liberty Sirius XM holders will get about 0.84 shares of the new post-split stock in the deal (10% of 8.4), Barron's estimates. Write to Andrew Bary at andrew.bary@barrons.com This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal. Corrections & Amplifications This was corrected July 17, 2024 because the original version incorrectly said holders of Liberty Sirius XM will get approximately 8.4 shares of Sirius XM for each Liberty Sirius share they hold. They will get 8.3 shares. (END) Dow Jones Newswires July 16, 2024 14:31 ET (18:31 GMT)

Ratings actions from Benzinga: https://www.benzinga.com/quote/SIRI/analyst-ratings

(END) Dow Jones Newswires

July 15, 2024 11:47 ET (15:47 GMT)

Sirius XM Holdings, Inc. (SIRI) is currently at $3.28, down $0.43 or 11.46%

--On pace for largest percent decrease since July 25, 2023, when it fell 14.5%

--Snaps a seven day winning streak