Daily Archives: August 18, 2007

Sirius Is Not Whole Foods Market

There have been a couple of media articles about shares of Sirius Satellite Radio (SIRI) rising because progress of the Whole Foods (WFMI) buyout of Wild Oats (OATS) is a signal that government antitrust watch dogs are going easy on mergers. Late last week a court ruled against the Federal Trade Commission by denying the agency’s request to block the transaction. The FTC has appealed the ruling.

The news move Wild Oats shares up 18% to $18, near their 52-week high. Whole Foods jumped 8% to almost $45.

Rumors are for fools. For starters, over the course of last week, shares in SIRI were down 7%. The stock of its potential merger partner XM Satellite Radio (XMSR) was down 5%. The S&P was down only 1%. The progress of the Whole Foods merger hardly helped the satellite radio combination.

And, the FTC is not the FCC. Nor is it Congress. The objections to the SIRI merger come from the fact that the government licensed the companies the airwaves that allow them to send their signals from the satellite to the customer receivers. It is a monopoly created by the FCC, not by hippies who want to buy organic chow.

The SIRI  merger is still unlikely. Congress has a problem with it because it believes that the price for satellite radio to the consumer will eventually go up due to lost competition. The FCC’s problem is that they hate Howard Stern and will do what they can to hurt him now that they can no longer regulate his content.

All mergers are not created equal.

Douglas A. McIntyre

Posted on: August 18, 2007 – 5:01 pm in Uncategorized, , , ,

Clearwire Debt Holders & Shareholders Selling Shares (CLWR, INTC, MER, DB)

Clearwire Corporation (NASDAQ:CLWR) had a filing after Friday’s close showing shareholder selling stock.  Upon seeing the mere name Clearwire you’d instantly think the company itself was selling more shares or taking on more debt.  It noted time after time that it would need vast amounts of capital above and beyond what it raised in the IPO.

This filing won’t do anything except pay shareholders.  The registration of this is for 14,973,024 shares of Class A common stock issuable on exercise of warrants registered.  It lists the financial tally as $369,683,963.  These shares from selling stockholders are in connection with debt financing transactions in August 2005 and February 2006. At least it looks like they are locked in and havn’t been able to do much with this so far.  The selling stockholders are prohibited from selling, offering to sell, contracting or agreeing to sell, hypothecating, hedging, pledging, granting options to purchase or otherwise disposing or agreeing to dispose, directly or indirectly, of any shares issuable upon exercise of the warrants until the expiration of contractual holdback arrangements on September 3, 2007 or as may be extended under the terms of the registration rights agreement.

One of the selling holders is Merrill Lynch Capital Corporation, a Merrill Lynch (NYSE:MER) affiliate.  It is selling 1,900,000 shares and will still own 1,298,126 shares after this sale.  Another of the selling stockholders, Middlefield Ventures, Inc., or Middlefield, is a wholly owned subsidiary of Intel (NASDAQ:INTC).  Deutsche Bank AG (NYSE:DB), London Branch is selling 2,133,334 million shares and will only hold 275,333 shares after this sale.  The rest is essentially all money management firms and hedge funds that are being sold.

Jon C. Ogg
August 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not hold securities in the companies he covers.

Posted on: August 18, 2007 – 11:00 am in Secondary Offering, , , , ,

GM’s Piple Dream

GM (GM) CEO Rick Wagoner says that the big car company is OK despite the tough stock market and problems in the mortgage sector. According to Reuters, "GM’s exposure to the subprime mortgage market is mainly through ResCap, the home lending unit of its former finance arm GMAC." The company says that the division is doing fine right now.

But, GM’s exposure, at least over the rest of this year and into next, is in sales of its cars in the US. Wagoner says that he has no evidence from this past week that vehicle sales are being hurt, but it is too early to tell.

The number of mortgages that will reset to higher fixed rates will increase as the year goes on.

The markets can be very perceptive. GM’s shares are down over 15% during the last month. That is about the same drop that Bear Stearns (BSC) has suffered. As odd as it may seem, the market’s concerns for the companies is not entirely unrelated.

The default rate for mortgages will continue to rise. And, if pessimists are be to believed, it will become an economic bloodbath. GM cannot afford sharper drops in its US sales.

But, sharper drops are almost certainly on the way.

Douglas A. McIntyre

Posted on: August 18, 2007 – 10:06 am in Uncategorized, ,

Sentinel Goes Charpter 11

Sentinel Management Group, a futures commission merchant, filed for Chapter 11. The fund has too many redemption requests and its portfolio had dropped sharply in value. The fund may now be able to restructure is debt and keep customers from taking out asset. At least for the time being.

The mess at the fund has to concern the market, because there are likely many other funds with similar problems. The Fed’s rate cut may have helped debt markets and the stock indices for a day, but problems in the mortage markets may get worse as more and more variable rate mortgages become fixed.

The market is likely to receive another series of blows in the form of news about other pools of capital that have become troubled by making wrong bets.

And, that means Sentinel is not the last firm to go bankrupt.

Douglas A. McIntyre

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Posted on: August 18, 2007 – 9:58 am in Uncategorized