Should the Sirius and XM merger not pass regulatory approval, both companies can still make it on their own, analysts told MarketWatch today.
Since both companies have been trading on the speculation of the merger alone, the value of the actual proposed merger has already been baked into the stock price. Let's face it, without the merger speculation, they'd be trading at much lower prices to begin with.
"The stocks have been trading on speculation about a deal rather than fundamentals," Tuna Amobi, analyst at S&P Equity Research, told MarketWatch.
But both companies were already on the road toward free cash-flow positive. Just not as quickly as once hoped.
"I think we'll see free cash flow from these companies on a sustained basis over the next two years," Maurice McKenzie, analyst Signal Hill Capital Group added. "These are still viable economic entities."
Pointing out that the decision to merge was clearly driven by economics, Don Hodges, manager of the Hodges Fund said: "You've got a couple of companies with extremely high overhead that realize that they've spent too much money, and that making a profit is way off in the future unless they're willing to cut some expenses.
In the event the merger is scuttled, neither XM nor Sirius would be dealt a fatal blow, according to Steve Mather, satellite analyst at Sanders Morris Harris.
"They're both going to have 10 million subscribers before long," he said. "And then 15 million."
"Pointing out that the decision to merge was clearly driven by economics..."
Your not kidding, it's now understood that alot has to happpen before this merger takes place but it were to fall apart and they went back as XM/Sirius, I wonder how they would then operate. I guess just alot of cost cutting.
Suggesting that both can survive is probably true and is certainly true for XM.
However, with billions of shares for Sirius and 270 million for XM, they won't make much when their splitting such a tiny market and replacing 400 million satellites fighting for content and busting ass for rich OEM deals that leave them broke.
I think XM got taken on this deal personally and think Mel needs to tell us how many outstanding shares are in the " New " company before I invest again.
One thing for sure... the stocks in the crapper till announcement and few think much of the potential when XMSR can't hold even it's bid price closing 2.00 under bid.
Smelly.
Subscription rates would almost undoubtedly rise to about $15 (SIRIUS has already hinted at this) if the merger fails.
Raise rates + fire DJ's = higher profit line
I find this funny because I thought the 'wall street consensus' was that the merger was needed otherwise both companies would fail?
Also in response to syphix's comment, that is surely believable. And in yesterday's conference call, I love how they talked about 'right now the consumer is paying $26 for both services and we see room for savings there'...while I understand what Mel is saying/trying to make sound good...he is incorrect. Most consumers only pay 13/mo (or less) because they only want to hear one services' content.