Sirius XM In The Midst Of Possible Bankruptcy
The stock for Sirius XM Radio Inc. (NASDAQ:SIRI) has plummeted to below 2 cents per share. About a year ago, the company stock was hanging on to about $3.19 per share and dropped rapidly. Mel Karmazin the current CEO of the combined satellite companies said he was planning on cutting costs for Americans to acess the service for $0.43 per day. “Forty-three cents a day — it’s not even vending machine coffee,”stated Karmazin at the time.
Sirius is now hiring advisers in preparation for a possible bankruptcy according to sources at the NYT. This is bad news for celebrities who currently depend on Sirius XM to broadcast content such as Eminem’s Shade45 and Howard Stern. A bankruptcy may cause Sirius XM to cancel contracts with celebrities.
If Sirius goes bankrupt, it would be the second largest Chapter 11 of the year. The company has $5 billion in assets including the satellite technologies. That is shortly behind Smurfit-Stone, a company with $7 billion in assets. Sirius XM has never seen a profit even when both companies were independent of each other. Now they have $3.25 billion in debt.
The automotive industry taking a hit has a direct correlation with Sirius’ failure. Many of the new cars on the market are Sirius XM-ready. If consumers aren’t buying them, they won’t have access to the satellite radio unless buying the peripheral device.
“Sirius XM hired Joseph A. Bondi of Alvarez & Marsal and Mark J. Thompson, a bankruptcy lawyer with Simpson, Thacher & Bartlett, to help prepare a Chapter 11 filing,” stated the NYT. “Documents and analysis are close to completion and a filing could come in days.”
EchoStar, a TV company may end up pushing the takeover Sirius as they already have bought some of the satellite radio company’s debt at $400 million worth. Once Pulse 2.0 finds out more, we’ll report it in the coming weeks.
For more information, check out the discussion on Techmeme.This article was written by Amit Chowdhry. You can follow me at @amitchowdhry or on Google+ at +AmitChowdhry