Sirius XM (SIRI) faces a possible delisting from the Nasdaq, according to a disclosure by the company. The firm’s common stock closed below $1.00 per share for 30 consecutive business days. That violates the Nasdaq Marketplace Rule 5450(a)(1).
Sirius has until March 10, 2010 to fix the problem. The issue disappears if the firm’s stock closes above $1 for 10 consecutive trading days.
Sirius is not left with many options. Its shares trade at $.69 and there is every reason to believe that if the company does not have extraordinary earnings for the third or fourth quarters that the stock will stay near where it is.
Sirius has one ace in the hole. Its shareholders have already approved a reverse split of the stock which would move its price well above the Nasdaq lower limit. According to Sirius, “the Company’s stockholders approved an amendment to its certificate of incorporation to effect a reverse stock split at a ratio of not less than one-for-ten and not more than one-for-fifty.”
Reverse splits are a time-honored way for companies to increase their stock prices. Investors always see though the process and often drive shares down once the maneuver is over. They understand a reverse split is a desperate move and says a great deal about what a company’s board of directors thinks about its prospects.
Sirius still has to answer the question whether it can keep its subscriber base and revenue going up. It relies on new car sales for most of its new business. It faces competition from the Apple (AAPL) iPod and a small army of multimedia smartphones made by handset companies from around the world and marketed by the three big celluar carriers AT&T (T), Verizon Wireless (VZ)(VOD) and Sprint (S).
Sirius may benefit from a reverse split in the short term, but a short term solution is all it is.
Douglas A. McIntyre
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