Immediately after RBR-TVBR noted that Sirius XM was within striking distance of getting back in compliance with the Nasdaq minimum price of a buck a share the stock broke through the $1 barrier and has stayed there. Much as we’d like to claim credit, we hear there’s something else going on.
Sirius XM closed above $1 on Wednesday and repeated the feat on Thursday and Friday. It needs to be above a buck for 10 consecutive trading days to get back incompliance, so that could come Tuesday, March 2nd. Why has the stock been doing so well? Our story may have focused a little more attention on the company, but it’s been on the upswing for a while – and that may be from speculators buying in to see if Sirius XM is going to be bought out.
First, it’s time to catch up on the fate of another company, WorldSpace. The beleagured international satellite radio has been in Chapter 11 for some time and a deal to sell it fell apart last August.
Since then, though, WorldSpace has found a savior in the form of Liberty Media, which has made debtor-in-possession (DIP) loans of millions to keep the company afloat and is leading the DIP lending group which has committed to $21.6 million in financing. Liberty also holds some of WorldSpace’s pre-petition debt and has a right to be a credit bidder to buy the company, which would give it a leg up on any potential cash bidder. (Not that cash bidders have been standing in line to go after WorldSpace.)
As it happens, this is the same Liberty Media which rescued Sirius XM from the brink of bankruptcy about a year ago and now holds preferred stock convertible into 40% of Sirius XM’s common stock.
As first reported Friday by Satwaves, some buyers of Sirius XM stock are betting that Liberty Media will make a play to buy up the other 60% of Sirius XM, buy WorldSpace out of bankruptcy – and combine the two into an international satellite radio company. An IPO of a merged company, debt-free and generating cash flow, could then follow.
RBR-TVBR observation: Will it happen? We have no idea. Could it happen? Certainly. Mel Karmazin is committed to shareholder value. So, if selling the company would be the best deal for shareholders, he would do it. But he’s not going to turn over Sirius XM to its largest shareholder unless Liberty antes up to make the deal attractive for Karmazin and everyone else on that 60% side.