XM And Sirius: A Merger? Again?

Stocks:  (XMSR)(SIRI)

The CEO of Sirius is at it again. A merger with XM? Maybe. Mel Karmizan, the head of Sirius is playing “cat and mouse” with investors and the press.

Since Sirius is the weaker company, perhaps Mr. Karmizan has it backwards. At $4.26, Sirius is trading near its 52-week low and is down almost 50% this year. It has over $1 billion in debt. And, that company still loses mountains of money. A merger? It may be the only way that Sirius stays in business.

XM’s stock is not up over 50% from its 52-week low, now trades at $15.27. XM has done a good job of restructuring its debt, and still leads its rivals in the key areas of units preinstalled in new cars.

If holiday sales go well both companies could become cash-flow positive, although that may not continue after the end of the year. It certain will help both debt laden companies. It may make a merger less necessary.

The performance of the stocks over the last three months would indicate that investors have much more confidence in XM. The larger company’s stock is up 20% over the period. Sirius’s stock is down 5%.

Karmizan may be right about a merger, but he may not be the last man standing.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.