This is a bear market and a recession, yet it still feels like Winston Churchill calling the actions of Russia as “a riddle, wrapped in a mystery, inside an enigma.” When you look at SIRIUS XM Radio Inc. (NASDAQ: SIRI) this becomes only too evident. We rarely cover penny stocks, but SIRIUS has only over the last month become a penny stock. Today is even worse. Shares touched $0.25 right after 2:00 PM EST today.
What is amazing here is that the company keeps getting hit for thesame reason, over and over, day in and day out. Let’s see… slowingautos perpetually, a weak consumer, high debt loads, inability ofcompanies to tap the capital markets, media, a recession, and more.About the only thing that you can’t attribute to the SIRIUS issue israpidly slowing trends in the “BRIC” economies of Brazil, Russia, India,and China.
The shares are currently trading down at $0.26, a drop of 17%. Iftoday’s drop holds, then SIRIUS will have closed down 13 of the 17trading days we have had so far in October.
Frankly, it is hard to imagine what you can do or say here. Imaginehow bad it would be to be Mel Karmazin right now. What can he reallydo? He borrowed and refinanced all he could at rates that seemed veryhigh, but in hindsight the rates were dirt cheap after you compare whatrates solid companies have paid recently. He can announce a reversestock split, but then traders will just take the opportunity to be ableto short more stock.
What is the worst thing here is that because of the stock price,Mel Karmazin has to be glad that the NASDAQ has suspended its policy ofejecting companies off of the NASDAQ merely for the 30-day rule oftrading under $1.00. Stock exchanges do at some point have tonormalize their rules and that cannot last indefinitely.
It looks like the rule exception will go through mid-January. But thatbeing said, what can companies do to save their stocks? Ultimatelythere are many such stocks which could face the same issues. We haveseen this before after the “dot.com bubble” in 2000 and 2001. But formany stocks this is only a one-way trip.
Jon C. Ogg
October 23, 2008