The likelihood of satellite radio provider Sirius XM undertaking a forced reverse stock split has substantially lessened with the company on the verge of regaining compliance with Nasdaq’s minimum bid requirement.
Since February 17, Sirius’s share price…
The likelihood of satellite radio provider Sirius XM undertaking a forced reverse stock split has substantially lessened with the company on the verge of regaining compliance with Nasdaq’s minimum bid requirement.
Since February 17, Sirius’s share price has risen and stayed above the US$1 per share mark, and if it remains so until March 2, equating to 10 consecutive business days, then the company will have met the stock market’s rules.
Sirius was informed back in September 2009 that it had breached Nasdaq rules and was given 180 days, or until March 15, 2010, to regain compliance. In response, Sirius said that it would consider all available options, including a reverse stock split, to maintain compliance.
The potential stock split option had already been approved by shareholders back in May 2009 in response to Sirius’s initial breach of the minimum bid requirement rules in October 2008, just two months after its protracted merger. Due to the unprecedented market conditions at the time, the company was given temporary suspension but with the share price not rising above US$1 for the whole of 2009, Nasdaq sent its warning to Sirius in September.
The revival in Sirius’s share price has coincided with a much brighter financial outlook. In its 2009 annual results, the DARS operator reported pro forma adjusted income of US$463m as compared to an adjusted loss of US$136m in 2008, while total revenue was up 4% to US$2.53bn. The company also revealed its first full year of positive free cash flow, reporting cash of US$185.3m in stake contrast to the negative free cash flow of US$552m in 2008.
“2009 was a notable year of firsts for Sirius XM: The first full year of positive pro forma adjusted income from operations and the first full year of positive free cash flow in the company’s history,” said Mel Karmazin, the chief executive officer of Sirius XM. “We demonstrated considerable operating momentum in the fourth quarter – the addition of over 250,000 subscribers, ARPU growth, revenue growth, improved SAC, and continued operating cost reductions. These gains position us to deliver on our 2010 guidance.”
The company’s situation is in stark contrast to where it found itself in early 2009 when the share price hit US$0.05 per share. Sirius was flirting with potential bankruptcy as it struggled to cope with its burdensome debt obligations until Liberty Media came to its rescue with a US$530m financing package, which subsequently gave the media group a 40% stake.