Some Sirius Satellite Radio SIRI investors are beginning to complain. Investors are blaming Sirius XM’s Mel Karmazin of ruining their investment by continuing to devalue shares. When SIRI and XM merged Karmazin had to renegotiate the debt XM owed, or the creditors could call that debt because of the sale. The easiest way for companies to get anything these days is to throw stock around. The problem with Sirius stock… is it is worth significantly less than SIRIUS XM’s market capitalization would have you think. This means undervalued share become increasingly undervalued with each new share issued… especially when issued at a discount.

The most recent fiasco is Sirius XM’s bail out by Liberty Media. Mel Karmazin gave up a 40% equity stake in the company to receive a loan that needs to be repaid at 15% interest. That looks to be an incredibly horrible deal, but it does beat the other option which would have been bankruptcy. Sirius investors would have been left with nothing if Mel Karmazin did not negotiate that deal. Instead, a very nice bounce in the stock happened, where many cashed in.

The shares have been diluted way more than anyone would like including Mel Karmazin. The main reasons behind Siri’s bargain bin price are the credit markets, the poor auto sales, and the delayed merger of the two companies. If even anyone of those went better than they did, the stock would be trading much better today. Mel has proven that he will not let this company go bankrupt, which means these shares can be picked up at a very nice price. If you are betting that the economy will rebound this year… bet on Sirius also.

Sirius XM Radio Inc. (SIRI)

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