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.