Nasdaq won't pull plug on Sirius XM Radio

Sirius is the last stock Nasdaq needs to worry about. A de-listing won't happen.

By Jamie Dlugosch Apr 8, 2010 11:32AM

Sirius XM Radio (SIRI) is making another assault on the all important $1 share price this week. Should the stock fail to trade above that level, the company is at risk for being de-listed by the Nasdaq later this month.

 

The stakes are high. Being de-listed by the preeminent exchange for growth stocks could result in the stock trading lower due to the low levels of activity on lesser exchanges.

 

Well, at least that would be the perception of investors, and perception in the market is everything. It would not matter that this company is performing well and likely to grow significantly in the near future.

 

 

Would the Nasdaq exchange risk losing one of its most popular and widely traded companies because its share price is below $1? I don't think so.

 

Besides, who cares what the stock price is? What matters is that this company has a market capitalization of nearly $4 billion with more than 125 million shares trading hands each day.

 

Nasdaq has rules on stock price because in most situations companies with low stock prices have major operating issues. That is not the case with Sirius. If anything Sirius is about to embark upon an exciting era of profits due to its superior product offering and monopolistic characteristics.

 

Yes, rules are in place to protecting investors. But Sirius investors need no protection at this point. The stock's rocky road has been well-chronicled. If you own it now, you believe in the long-term story of satellite radio. (Or you're a game playing shortseller who deserves what you get, good or ill.)

 

If this matter does come to a head, the company may feel compelled to complete a reverse merger. In a reverse merger, a company forces investors to exchange a larger number of shares in return for fewer shares.

 

All else being equal, those shares would trade above $1. Problem solved.

 

 

Of course not all things are equal in the market. Investors are not trading in a sterile laboratory without external influences. Should Sirius conduct a reverse merger, short sellers would pounce on the stock sniffing weakness.

 

In all likelihood, the value of Sirius would fall in a reverse merger even if the share price increases.

 

The noise about the $1 threshold takes the focus off a budding story of profits and subscriber growth. With balance sheet issues mostly resolved, the company can focus on execution.

 

That execution in a strong economy, including sales growth in the all important auto industry, should result in Sirius beating expectations in the first quarter of 2010.

 

I’m counting on it and as such believe Sirius has the potential to double in value from here. If so this nonsense, about $1 share price will be long forgotten.

 

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