Sirius XM at 15 Cents a Share?

Sirius XM (NASDAQ:SIRI) recently hit 8 Cents a share, today its at 15 Cents a share.  Yes that would be one dime and one nickel in value.  How did this happen, can it go lower?  One thing is for sure, Howard must be loving those stock options.

What the hell, 15 Cents?

Now I don't have a position in SIRI but at 15 Cents, I'm thinking about it, why not, if it busts, it was only a few bucks lost.

Andrew Snyder has wrote the only article worth reading on Sirius lately, it was on Thanksgiving, here's what he said:

Sirius XM (NYSE:SIRI): Is this a buying opportunity?

The subscriber growth figures tell the whole story. In 2006, Sirius saw its subscriber base grow by 82%. In 2007, that figures was 38%. This year, it will be lucky to lock in growth of 10%. And next year, the company optimistically expects to expand its base by just 8%.

Those are the kinds of growth figures you would expect to find in a mature industry, not one with less than 20 million subscribers.

What is worse than the company’s declining revenue base is its monumental debt load. In the next twelve months, Sirius has over $1 billion in debt coming due. $210 million of it must be paid in February. Unfortunately, the company’s balance sheet shows no way for it to find the liquidity needed to pay its bills.

Combine huge debt, incredible talent contracts (Howard Stern has a $500 million, five-year deal) and a consumer base that is going broke and it is easy to see why shares of the company are trading at all-time lows.

With share price at just $0.15, shares of Sirius XM have plunged by more than 90% this year.

Bankruptcy and an equity valuation of zero should be a serious concern for investors. Unless the company can re-structure, find the investors and subscribers it needs and can lower refinance its debt, there is no way it is going to stay in business for more than a year or two.

Finally… some potential

But speculative investors finally have a shot at rewards with the company. In late December, Sirius shareholders will get together to vote on some very important issues.

First, executives are asking investors to approve a major dilution of their positions. The company wants to boost the number of shares outstanding from 4.5 billion to 8 billion in an effort to bring in much-needed capital. The move, while essential to the company’s future, would hammer the valuations of today’s shareholders.

To help make shares more attractive to potential shareholders, management would also like voters to approve a major reverse stock split, ranging from 1 for 10 to 1 for 50. If approved, shareholders would own dramatically fewer shares of the company, but those shares would be worth much more.

With so much negativity priced into this company, it is hard not to be at least a tad optimistic.

For investors getting in at today’s prices, the upcoming shareholder meeting could lead to profits. After all, it is bound to bring increased press coverage and any good news could lead to short-term price spikes.

Volatility will be the key to this stock over the next few months. If you can stomach the ride and the very real threat of bankruptcy, there will be some shots at fairly large profits.

So what's the risk if you buy at 15 Cents?

You could lose it all, bankruptcy is a real option at this point. 

Disclaimer: No positions in SIRI.