Short Sellers Gain on SIRIUS XM as Pandora Rises (SIRI)

SIRIUS XM Radio Inc. (NASDAQ: SIRI) peaked above $1.70 at the start of 2011 with a high of $1.72 on January 3 and a high of $1.74 on January 4, but the highest close was $1.69 on January 3, 2011.  The wind was at the satellite radio’s back after resigning the NFL and more importantly securing Howard Stern for a few more years.  Despite a rising market, there has been some overhang here in SIRIUS XM shares and it has sold off marginally while the NASDAQ rose since the start of the year.  Now there is the short interest to consider because that appears to be at the highest level in a year or more.

The short interest has been elevated in recent months, but the new data out from NASDAQ for the December 14, 2011 settlement date shows a reading of almost 240 million shares.  The exact figure is 239,986,902 shares in the short interest, which comes to 4.64 days to cover.  The highest days to cover ratio had been 6.03 as of the November 30, 2010 settlement date.  Still, 239 million shares is the highest even compared to the peak 225.7 million at the December 15 settlement date and 224.2 million shares at the November 30 settlement date.

What may be at issue here is the threat of Pandora Radio.  The recent Consumer Electronics Show had much after-buzz about the rise of Pandora. It has always just been a potential threat, but now it is at least starting to come of age with the ability to get into cars and with its iPhone app becoming one of the very top downloads.  Pandora is trying to get more into other aspects other than just artist channels and groupings, and it appears to have an upcoming Grammy Awards tie by grouping music around the Grammy’s.  What Pandora does not have is the vast host of exclusive celebrity shows and live events for sports, news, and more.  There are barriers to entry there, mainly contract exclusivity and price.  Last month came another corporate credit rating upgrade from S&P based on much of the ongoing improvements.

A recent report from Seeking Alpha shows that institutional insiders have been accumulating SIRIUS XM shares of late.  There is generally a lag to that data, but the growth of the car industry in 2010 helped out and the expected growth of auto sales in 2011 is expected to keep adding subscribers.  Pandora will have a very hard time duplicating the SIRIUS XM model, but SIRIUS could rather easily adopt some aspects of the Pandora model and it could charge for it.

Industry pressure and threats can always act as an overhang.  The recent Pandora buzz coupled with the massive 2010 run up of 166% are probably giving short sellers some added courage here.  If you look at the NASDAQ Short Interest data, you will notice that the short selling up is more than 300% from a year ago.  Maybe it was the 2010 gain that is attracting short sellers or maybe it is Pandora’s rise.  Maybe there is a thought that SIRIUS XM can’t just keep raising guidance time after time.  Whatever the thought is, the short sellers have increased their bets against SIRIUS XM.

JON C. OGG