Sirius XM: Reverse split unlikely


Sirius XMSeeking Alpha’s Stephen Faulkner writes that Sirius XM, in present form, will not be doing a reverse split. As well, he says, majority owner Liberty Media would see no benefit from a reverse split:

“A recent article about Sirius XM (SIRI) here on Seeking Alpha explored why the author felt Sirius XM ‘needs’ a reverse split ‘now.’ I disagree, and to be completely honest I find the idea of a reverse split today not only improbable, but near impossible when one considers Sirius XM’s present state.

The fact of the matter is that between the author and a few commenters, the idea of a reverse split is simply a daydream. It’s an “if I ran Sirius XM instead of writing about it, then this is what I would do” sort of thing.

Why do I feel this way? Glad you asked!

There are certain critical issues here that need to be explored in order to understand the present state of Sirius XM.

First and foremost, Sirius XM is owned and controlled by majority holder Liberty Media. Understanding this is paramount to understanding what may or will be done with the company because ‘everyone else’ is the minority. All that matters is Liberty Media.

Second, Liberty Media’s market cap is by gross majority made up of the value of its stake in Sirius XM. Because of this, Liberty Media guides Sirius XM, and Sirius XM guides Liberty Media.

You can dislike these facts, but they are not changing anytime soon. If you are invested in the company, you should be completely comfortable with this arrangement which has been in place since Sirius XM traded for about 10 cents back in 2009.

So why do I say Sirius XM will not be doing a reverse split? How can I be so confident? Because it doesn’t benefit Liberty Media to do a reverse split. It’s that simple. Likewise, if one subscribes to the notion that a reverse split would drive out what is insinuated as ‘dumb’ retail and bring in what is insinuated as ‘smart’ institutions, then one also subscribes to the notion that the share price would increase above the increase due to the reverse split.

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