Sirius (SIRI): The Shorts Pile In

April 25, 2008 by Douglas A. McIntyre

Short sellers have fallen in love with Sirius Satellite (NASDAQ: SIRI). Actually, they were already in love. It has moved to infatuation.

The short interest in SIRI sky-rocketed for the period ending April 15 compared to March 30. Shares sold short moved up 20.2 million to 157.9 million. The company’s merger partner, XM Satellite (XMSR) also watched its short interest rise by 6.3 million shares to 22.7 million.

The figure for Sirius is especially disturbing because, at $2.67, it was recently at a 52-week low.

Investors could be making one of two bets. The first is that the FCC will not approve the merger of the two satellite radio companies because the agency believes that it would create a monopoly. SIRI and XMSR are counting on the tie-up so that they can save redundant costs. Neither makes money now.

The other concern may be that a merger will do very little to save the companies. Each has over $1 billion in debt and in the current credit environment, that may be almost impossible to refinance. The companies may simply not be well capitalized enough to make it at all.

Douglas A. McIntyre