Cramer Likens Sirius-XM To Lotto Ticket (SIRI, XMSR)

Jim Cramer came out tonight on CNBC’s MAD MONEY discussing his trade idea for the satellite radio merger approval.  This is to focus on the current situation and pitfalls for shares of Sirius Satellite Radio Inc. (NASDAQ: SIRI) and XM Satellite Radio Inc. (NASDAQ: XMSR).  Earlier this year his call was for the stock to go to $5.00.

Unlike Cramer’s big stance where he thought the combined company was worth a shot, he has a different way he wants to play the success of this merger tonight.

If you have been a Sirius-XM stock bull you aren’t going to like whatJimbo said.  In fact, he said that the combined Sirius-XM common stockis about as safe of an investment return as buying a lotto ticket.  Buthe does have one way he’d like to play it.  Cramer noted that therecent debt offerings were the safer way to play because the combinedoperation is going to be losing money and is beholden unto the debtowners.

He noted that these had a combined loss of $668 million while thecompanies were awaiting the merger approval and the companies areextremely far behind profitability targets that were already expected ifyou go back and review research reports.

The good news for the common stock shareholders is that Cramer did notehe doesn’t think that the company will go bankrupt.  But he’s ratherhold the debt which will get to inherit the company if that occursrather than investing in lotto tickets.

Sirius closed down 16% at $1.88 today on major volume, and shares were down almost 8% at $1.73 after the Cramer-pan.  XM shares closed down almost 12% at $8.17 today on active volume, and shares were down over 7% more at $7.55 in after-hours after the Cramer-pan.

Jon C. Ogg
July 28, 2008