Now that Sirius (SIRI-NASDAQ) and XM (XMSR-NASDAQ) have announced a merger of equals to tie the knot, you have to wonder how the media and the street will treat the companies as a single combined entity.  The street has been hoping for this, so you know the bulge braclet coverage won’t treat it any more unfavorably than before.  But it will be interesting to see how Cramer treats it since he can talk about the combined entities on a daily or nightly basis.  This SIRI stock is one of the most active stocks every day and is one of the most widely held stocks in the country. 

How many times have we heard Jim Cramer on MAD MONEY and other shows on CNBC apologize for befriending Mel Karmazin at Sirius (SIRI-NASDAQ)?  Many.  He felt duped because he invited Mel Karmazin on MAD MONEY for an interview and then later the company came clean and issued some downside to its Q4 subscriber additions.  Cramer had been out before that interview saying that XM (XMSR) and Sirius (SIRI) needed to merge, but after Karmazin came on MAD MONEY Cramer lightened his stance.  If you wanted to see an ‘angry Cramer’ it was after the downside came out from when he trusted Mel Karmazin.  That is not Cramer’s fault nor is it anyone else’s who actually believed management.  A statesman wouldn’t call most CEO’s liars, but a realist would certainly expect that CEO’s just aren’t going to come on national TV and be negative or cautious about their company if they don’t have to.  CEO’s also tend to be optimistic and hope that minor trends aren’t part of a major slowing.

Since that subscriber warning date Cramer has maintained that he didn’t want to speak about Sirius until IF/WHEN the company announced the merger with XM.  So now that this has happened how will Cramer treat the combined entity?  A fair guess is that he’ll treat it with some caution because of all the research concerning the potential blockage of this merger by regulators. Most likely it will be in praise of the merger, but he is probably going to be reluctant calling Karmazin the man of the year.

This is not a done deal by any stretch and you can imagine that today and beyond we’ll start seeing more and more one-liners from wire services filling everyone with doubts.  With at least 3 federal agencies that get to review this and with the various congressional committees that have overlaps on this, you know the ‘govies’ and regulators are all going to want their own share of air time covering this after the fact. 

The last issue to take is the inherent losses that will be still seen on paper from holders.  Many shareholders have been long and wrong on these names for some time.  That doesn’t mean that they are instantly entitled to gains, but it doesn’t mean they will just go out with a whimper either.  These won’t be recognized losses, but a loss in one name and a switch to an instant loss in another doesn’t always make it an easier of a sell.  Many well known investors have been caught in these names along with the retail investors, so get ready for the boxing gloves and megaphones to be out instead of pom-poms.  This one is going to be controversial all the way to the closing date.

Jon C. Ogg
February 20, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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