As the new year came, many people took the time to reflect on all that transpired during 2008. High gas prices, banks failing, and investment portfolios taking a beating like many have never seen before. For satellite radio investors, 2008 meant a united front against the NAB, and endless waiting on the FCC for a decision on the merger. The merger process during 2008 took a toll on this equity that it has yet to recover from, and many still are betting against a recovery.
What will 2009 bring the satellite radio investor? Most of what anyone will say is based on speculation and opinion. Car sales, which have been down to record lows need to recover at some point. This could happen in 2009, but it will not be early in the year unless something extraordinary happens. This means that OEM installations of satellite radios will be slow as new year begins.
Sirius XM has some refinancing to do as well. The first order of business is the February converts. While i see no real problem for the company to deal with the just under $200 million, there is still another $800 million to deal with throughout the year. If the company is unable to wrap up all 2009 financing in one neat package, then the equity could well tread water until all of the hurdles are cleared. This could mean investor frustration for some time to come. On the flip side, should the company announce that they are able to get the financing needed, the equity could recover on that news. The debt issues seem to be a major overhang, and any progress that handles all of the debt would be a positive for the company as well as investors.
The merger synergies should begin to bear substantial fruit in 2009. Savings on many line items will help the bottom line, and may make the balance sheet more attractive to investors. Combine good news on synergies with positive financing, and the end to the auto crisis, and the viability of peoples confidence in the business model may be revived.
All of this boils down to speculation. Sirius XM stock is highly speculative at this point. Perhaps more-so now than in several years. What makes things more difficult now is that investors are a lot less willing to speculate in the current environment. Some investors have even gone so far as to cease investing altogether in favor of holding cash and waiting. I can’t say I blame these people. Looking at my portfolio over the past few months has been frustrating to say the least.
At this point investing in Sirius XM means a series of questions that each investor must ask themselves.
