Sirius XM Shorts Scrambling to Cover

by: Brandon Matthews August 27, 2008 | about stocks: SIRI    

Brandon Matthews

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Like a thief in the night, holders of Sirius XM (SIRI) short positions are scrambling to cover. According to Satwaves.com, Sirius XM short interest has fallen 32.69% from 310,672,182 shares to 209,124,306 in only a 2 week period; a decrease of 101,547,876 shares.

A check of the NASDAQ market site verifies this information, which brings the number of Sirius XM shares short to nearly the levels of the pre-merged stand-alone company. It would seem that the shorts are taking advantage of a suppressed stock price to cover, as the “upside” potential of a short position in Sirius XM has seemingly diminished.

With the knowledge of the recent loan of 168 million shares to short against the convertibles, it would seem that few true shorts remain.  A recent Reuters report on overall short interest indicates “that investors may think the worst of the market downturn may be over.”

With over 200 million short shares remaining, those that continue to hold positions short may find themselves at the losing end of any good news reports going forward, as very few others will be there to support their positions and risk fighting renewed strength from the buy side of the ledger.

Position: Long SIRI

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This article has 45 comments:

  •  
    Aug 27 02:34 PM
    SIRI shorts are "scrambling to cover"??? Another LIE. Scrambling implies a panic as in a short squeeze. I find it funny how the stock price keeps going down. They are gradually and selectively covering, as what usually happens after big profits have been made.

    I will now give this post the response that it is due; one from yahoo chat boards, where all of your readers live.

    "Mel Is 100% Right, SIRI Investors Are Unsophisticated"
    They fall in love with stock, post stupid meaningless comments, constantly do bogus math projections that mean NOTHING, and to top it all off, you morons actually thought because you put a high post-merger price target on this board and repeated a gazillion times, that it would actually go up when the merger was finally a done deal. You people are 100 times worse than the Enron, Kmart, Global Crossings and Nextcard investors. As long as their are idiots like you with no common sense, there will always be people like Mel and Wall St. to continue to play you all like the fools that you are.

    You all deserve everything bad that has fallen upon you, especially you, Crfceo (domonick LaViola, another SIRI stock pumper who posts BS and who has also lost his a** like Tyler and Brandon have) who is buried in this stock. Only an inept moron investor like you, would do what you have done by completely ignoring all the warning signs and throw caution to the wind, in favor of posting your ridiculous opinions and outrageous lies.

    Just because you idiots say it's so does not make it so. Time has proven the shorts to be right over and over again. Know why? Because they are notorious for doing their exhaustive due diligence, never fall in love with their trades, know how to read a profit and loss statement and the shorts have a tremendous amount of business savvy, unlike you SIRI jackasses, whose only capabilities are to run a business into the ground and piss your money away on high risk junk stocks for companies mired in massive debt, huge overhead, declining sales percentages, massive quarterly losses and consistantly declining stock value.

    You all go ahead and play your stupid 'iggy list' games, ignore the obvious warning signs about this stock, in favor or posting nothing but your worthless 'feel good' posts. It won't prevent your investment from continuing to lose value, but it sure is fun to watch you idiots run around in a frenzy, blaming everyone else for your own failures.

    Let me close by sayiny the shorts wish to thank you many times over, for the massive wealth you have bestowed upon them. If this wasn't happening for real they would swear it was a dream of getting their own pockets stuff with wads of cash by you stupid, unsophisticated longs. When the BK gavel drops and it will, we will really be laughing our asses off real hard at all of you losers."

    messages.finance.yahoo...
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  •  
    Aug 27 02:45 PM
    Seeking Alpha changed the title. The original post, located at SiriusBuzz.com was titled: Time To Cover Sirius XM Shorts

    Thanks for your needless rant. No apology required or neccessary.
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  •  
    Aug 27 02:54 PM
    Brandon, you should be more diplomatic and thank mr Cramer for his post........
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  •  
    Aug 27 02:55 PM
    You would have to be stupid to not cover your SIRI short at these levels.


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  •  
    Aug 27 02:57 PM
    Does it mean the price will be up?
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  •  
    Aug 27 02:58 PM
    "Exposing Idiots"--now--the... is a thoughtful name for a reasonable person wanting to post a thoughtful counter analysis. Instead, you just insult the poster. To me, that exposes your desparation. Why are you wasting time posting on Yahoo and here if you are so apparently disinterested in Siri and think that the writer, as well as others who have a great deal of inside information, are so apparenty misinformed? I think that you are a stock basher, based on the tired rhetoric and empty bankruptcy rumblings. The company is a long way from a bankruptcy threat and has many plans to restructure the debt, as has been disclosed. Of course, if huge amounts of subscribers cancel and people suddenly stop buying sattelite radio, and cost cutting is not performed, bankruptcy would be a possibilty becuase the convertable debt would not be able to be refinanced or paid. I dont think that there is a good chance of that happening. In fact, I think that the chances are miniscule. So, mke reasonable arguments based on real facts, not based on footnotes in financial statements and weak talking points from either pissed off investors or market opportunists. I choose to make my judgments based on facts. Whoever beleives that siri is not a speculative or somewhat risky investment is simply in the wrong game. But, 1 year ago, Bear Stearns was a "blue chip" stock. So, none of us really know anything except that corruption has become rampant on Wall Street.
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  •  
    Aug 27 03:11 PM
    Oregonduck...I just love your eloquent literature, thnx again for your optimism and reality checks
    Reply | Link to Comment
  •  
    Aug 27 03:21 PM
    The time is near if people don't want to join us too bad, shorts will suffer big losses along the way: Mel's comment during his last interview with Cramer
    Reply | Link to Comment
  •  
    Aug 27 03:34 PM
    Tyler you and Brandon are OK in my book. The problem is that you ask for comments. In my opinion there are those who post stupid comments.
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  •  
    Aug 27 03:46 PM
    Why would someone in a long position want to warn someone in a short position that they are about to lose money and vice versa? I never could understand that part about these boards. Since one side is always wrong and you don't know which, it seems rather pointless to post opinions at all doesn't it?
    Reply | Link to Comment
  •  
    Aug 27 04:13 PM
    "Exposing Idiots" take your prosac...Say idiot word after word is null of intelligent thought.
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  •  
    Aug 27 04:40 PM
    exposing idiots must be a child. i hope all shareholders refuse to listen to uneducated children. the language reminds me of a high school bully that i slapped around. we as shareholders are no longer in school and deal with you bullies in an adult manner now. we laugh at language such as what you use and dismiss it as garbage.
    Reply | Link to Comment
  •  
    Aug 27 04:40 PM
    Anyone re-posting from the yahoo message boards should be shot in the mouth, usually they are very lonely bitter people who don't leave their basements very often. I especially love the "I made millions shorting this stock" posts.
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  •  
    Aug 27 04:46 PM
    Hello all Siri Investers-even shorts- I was forced into taking over my retirement plan. I came out of the denial that Merril Lynch had failed my retirement. I rolled into an IRA at WFC. I was mad enough to take on stocks. I'm a ship Captain not an Stock Broker,,well after 4 years I've fummbeled my way back-its in a respectable level,along with 2 more wellstrade accounts--those 2 accounts are in the 250 k level-. I am an Amature invester - I will never leave my day job-thats were I'm at this minute -yeap offshore reading and writing from India. If the investment bankers,brokers and the likes of ML hadn't BKK so many accounts to greed and stupidity-us amatures would have left our accounts with the pros---I've been into siri,WFC ,BAC ,and over 100 other stocks because of man I read once -Warren Buffet-BUY what you know--Siruis is in my truck,my wifes car has XMSR ,we love it.we decided it was a future stock for our needs,,in 4 years I've been in and out of Siri,-yeap its paid for alot of lifes payments-paid for the 2005 Dodge truck, sons Mazda truck,his 2 years at SFSU and remodeled our vacation condo..
    I'm Long some days , I swing trade and leave shorting to shorts- I'm way to heavy in SIRI ,,but see at as a good investment--thanks to ML for there Failure and making me open my eyes to STOCKS--
    Reply | Link to Comment
  •  
    Aug 27 05:04 PM
    The shorts doing the covering are the Arbitrage players, that is how there was a 100 million share drop in the short interest while the stock showed no signs of being runnup by convering. That is because the Arb shorts didn't have to buy on the open market to close their shorts.

    The numbers add up... the increase at the end of July was the new shares being loaned out for shorting by the hedge funds, then the decrease after July are the Arb players exiting their positions.


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  •  
    Aug 27 06:24 PM
    It looks like the SIRI will cycle between $1.30 and $1.50 for the next few weeks or even months until positive cash flow, which will happen. I would aslo be covering a short position at $1.31 and getting ready to short again at $1.49. However, I am not short, I am in for the long haul.
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  •  
    Aug 27 06:39 PM
    Wow, where to start? I run a Mortgage Servicing Company and can comment on forclosures and property seizures, this is my expertise. Trading stocks is not. I manage my IRA and over the past 6 years I have not done so well but the wealth of knowledge I have gained is worth way more than the few thousand dollars I have lost. Considering the time frame of my investing 01 and beyond I am still feeling ok about my stratagies. I know Cramer has been getting smashed on these threads lately but all the nonsense about him being a pump and dump guy is bull. My question to all the Cramer haters is are you a listen to his program or subscriber to his Action alert plus website, or have you read his books? Cramers charitable trust is were he puts his money in his mouth, the show is merely for entertainment, and his books are excellent. Where does SIRI come into this rant? In Cramers books he feels you should own no more than 5 stocks in different sectors, but he is huge on earning and forward earnings....siri has neither. SIRI should be looked at as no more that a speculative stock and that is ok. One strategy I implement is looking for good companies with bad stocks. SIRI is a perfect example...they have good mgmt...the won a fight with the unbeatable FCC...they have all the sports...CNBC...Stern.... other stations. Satellite radio reminds me of cable television. No one belived people would pay for Cable TV, why we have 2...6.. and 10 and they are free! Now I pay Time Warner around 120$/month and I am glad to do it. The monthly cost of siri is around 43c a day and the price is going to go down. With only 19 million subscirbers the sky is the limit. If your time frame is more that 3 years out your looking at a winner. Relax, in Mel we trust.
    Long SIRI and Steelers
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  •  
    Aug 27 07:41 PM
    Exposing Idiots, (or "socalbobll" from Yahoo), If your making money hand over fist as a wise and sophisticated investor on the "short" side of this trade congratulations. I only wish you could help the rest of us out with your wise stock picking practices and maybe help us recover some of our lost wealth. Instead of insulting us maybe you could find your way to being more benevolent and a lot less malevolent. Seeing how we have lined your pockets with gold maybe you could return the favor.
    Reply | Link to Comment
  •  
    Aug 27 08:08 PM
    Lemmings !
    Reply | Link to Comment
  •  
    Aug 27 08:34 PM
    Chapter 11, You never disappoint with your negative insulting BS. Your just another bitter investor who sold their shares after the merger and now hangs around insulting those of us who decided to stick it out with this company. Now, after you said you held your stock for 2 yrs., we're all Lemmings drowning in our investments because of our herd mentality. Lot's of class man.........get a life.
    Reply | Link to Comment
  •  
    Aug 27 08:53 PM
    Homer985 , I agree with what your saying. These are the "Arb" shares lent in the private sale of the 7% Exchangable Senior Notes. The decrease will probably continue through the end of the month while they cover their short hedge. I think there were 187 Mil shares available for the deal so maybe this reduction is more an indication of participation than anything else. As I've been saying along with others these shares were never available for public trading so no affect on Stock Price. Shaefer Investment Research charting of Short Interest supports this information as far as the timing with the "Deal" event.
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  •  
    Aug 27 09:22 PM
    Cos... the mid July short interest was 159 million. It ballooned up with the end of July figure to 310 million... an increase of 150 million. The loaned shares to the hedge funds was 183 million and they were traded on 7/28/08, at a price of $1.50. That puts them just in time to be included into the end of July short interest report, taking it up to 310 million.

    Then when the Arb players began closing their positions on 7/29 and later, this was reflected in the mid August report. This is because any and all short trades made from 7/29 through 8/12 would impact that report. Thus, it dropped by 101 million. These being the Arb players that went long XM over the last year or so, while shorting Sirius.

    I don't believe that the hedged positions have closed out yet -- they wont close out until the debt is converted, many years down the line.

    Right now, the 210 million short interest is made up mostly of the hedged shares sold at $1.50 (between 150~180 million). There is then another 30-60 million "other" shorts still in the mix. I suspect the end of August short interest will continue to show a drop.


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  •  
    Aug 27 10:34 PM
    Homer....are you saying that the XM longs who hedged their position over the last year or so had to close their Siri "short" position because of the merge or simply because their XM Long position converted to a Siri long position and they just covered their "shorts" because those positions were no longer an "Arb Play" or Hedge?

    In any event I can see that the 100 mil reduction came from shares available to the public from previously Long XM investors. The 150-180 mil "Short" shares are not available to the public but are part of the 7 % Exchangeable Senior Note Offering Arb. play or Hedge to those note purchasers. So these shares will be included in "Short Interest" calculations but will not be included in company metrics such as, EPS.

    My understanding also is that the institutions conducting the note sale and borrowing the lent shares must purchase a Long position, virtual or otherwise, for each share shorted by the note purchaser. It would seem that all of this being true, exaggerates the effect of "Short Interest" and recent volatility in this metric.
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  •  
    Aug 27 11:31 PM
    Cos100,

    Nope I am not at all bitter about selling Siri. In fact very happy I sold all stock!

    In the last two years I bought & sold over & over again making $$$ and putting it away in the bank account. This go around I only lost $800 , but still on money I made on Siri before. So I didn't loose any of my own hard earn cash.

    Just wondering why you all are still hanging in for dear life & still dumping more cash into it.

    If you are all so long on Siri & think this company will be profitable, why look at the results everyday?

    Why not just forget about the stock for a few years & check back later?

    It's fine that all of you need to blow air up each others skirts.

    You also need people like me to balance out the false hope.
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  •  
    Aug 27 11:40 PM
    Cos1000,

    It's great that I can get you bent out of shape with ONE word.
    Exposing Idiots had to write an entire book to do that!

    It could have been worse. I was going to use the "JIM JONES" example!

    Everyone on the bus !!!!

    Good luck in Loosing all your money suckers!
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  •  
    Aug 28 12:16 AM
    I hate loosing my money, and when my pants are lose.
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  •  
    Aug 28 12:18 AM
    Cos............... this chapter 11 clown is worse than that vicar nosepicker. HARD TO BELIEVE.
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  •  
    Aug 28 02:02 AM
    When I post I usually notice mispelled words, but at least I try to spell correctly. "Loosely" stated dave, you should try to "lose" your inability to spell correctly if you are going to slam people on this board in a dignified way.
    Reply | Link to Comment
  •  
    Aug 28 02:03 AM
    Woops--sorry dave--that was meant for Chapter 11.
    Reply | Link to Comment
  •  
    Aug 28 08:05 AM
    I think that first guy must have lost his a s s and is now trying to follow that Duke theory I read about the swing trade...lol Either that or he is just another siri message board basher loser with no life. Myself I appreciate the bloggers and crfceo for there efforts to post news as they find it so I don't have to go searching for it. Thank You!
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  •  
    Aug 28 08:41 AM
    killerkaul, it is hard to understand the entertainment value of posting his insults. He is a "small" individual trying to overcompensate here, is the best I can guess. He's just looking for a place to get some of his lost self esteem back and failing miserably......again. Imagine thinking about using the tragedy, that was "Jim Jones" here to describe investors. This is a "Dark" individual.

    .
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  •  
    Aug 28 09:55 AM
    cos...........hard to add anything to that.
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  •  
    Aug 28 01:22 PM
    cos1000.... yes, XM longs who shorted Sirius (based on the exchange ratio), would naturally close the position altogether when the merger closed and their XM shares were converted to Sirius shares. They then would have an equal amount long and short -- so the position would then be closed out.

    The shares loaned to the hedge funds are very much out in the public at this point. There were 183 million of them sold for $1.50 on 7/29/08. Those shares are now outstanding being traded around -- however Sirius/XM themselves will not count them in their calculation of various earnings metrics. If the hedge funds close their position by selling the convertible notes then they will be required to buy them back on the market and deliver them to UBS or Morgan Stanley (whoever loaned them to them); and then UBS/Morgan Stanley must deliver them back to Sirius. Regardless, they're now out their in the Float.

    Regarding UBS and Morgan Stanley buying offsetting long positions -- this is partially true. They are not "required" to do it and they only agreed to do it against the "supplemental&quo... shares sold short. Recall that the hedge funds shorting was in two parts... the first as one offering at $1.50... UBS/Morgan Stanley is not buying long positions against that; but rather, they agreed (at their discretion) to take a long position (or equivolent) against any "supplemental&quo... shares sold short by the hedge funds. The supplemental shares would be what remains of the shares borrowed that were not sold in the original placement on 7/29/08.

    Got that? There'll be a quiz later...

    Really, the whole thing can be complicated. I still find tidbits I didn't realize every time I read it.


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