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Friday, July 28, 2006

XM Shareholders Grab the Pom Poms

You can imagine on a Friday when the market is up a little over 1% and you see +4.2% on SIRI and +16% on XMSR some heads had were being scratched.

We, well let me say I, have been pretty critical of XM Satellite Radio (XMSR) and on Sirius Satellite Radio (SIRI). It isn't so much about the company or about the prospects of the company, but the performance of the stock has been just atrocious. XMSR has lost more than 50% this year and SIRI is not that far behind. These guys need to deliver for shareholders with some new great initiatives. If it is a merger, great. If it isn't then they better do some better content deals and more bundling deals. Or maybe they just do nothing after releasing bad news since that seemed to work today.

Early this morning there was a very brief note on CNBC about the chances of deal happening or not, maybe that was taken to an extreme. This has been mentioned before by us, by CNNMoney, and by numerous others with SIRI and potentially several others being potential acquirers. As of today, there was nothing known publicly.

Its earnings were out yesterday. We had no corporate press releases this morning for this, but there was an S-4 filing after the close. The company's SEC filing shows 2 different exchange notes of $600 million and $200 million, but this will not result in real net proceeds going to the company per se. It looks like there may be some more favorable terms for the company, but on a Friday after the close it is almost academic (particularly if I am on the way out to a baseball game). Here is the summary:


The exchange offer is to satisfy certain of our obligations under the registration rights agreement covering the notes. We will not receive any proceeds from the issuance of the exchange notes. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive, in exchange, an equal number of outstanding notes in like principal amount. The form and terms of the exchange notes will be identical in all material respects to the form and terms of the outstanding notes, except as otherwise described under “The Exchange Offer—Terms of the Exchange Offer.” The outstanding notes surrendered in exchange for exchange notes will be retired and canceled by us and cannot be reissued.

The funny thing is that RBC lowered its target to $20 today, Bear Stearns had no rating change but noted some caution over near-term prospects, and CIBC downgraded it early this morning to a Sector Perform. That analyst at CIBC probably isn't answering the phine this weekend.

XMSR traded 19.7 million shares, compared to about 8.8 million on an average day. The August $12.50 Calls traded over 7,400 contracts, but that isn't even the equivalent of 1 million shares leverage on a translations basis. If they have any huge corporate news announcements on Monday or over the weekend you can be sure there will be some investigations into a news leak. Have a nice weekend.

Jon C. Ogg
July 28, 2006

Jon can be reached at He does not own any securities in or have any positions in companies he writes about.

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