Coming Back To The XM Satellite (XMSR) Merger With Sirius (SIRI)

The Wall Street Journal came back to the XM Satellite (XMSR) merger with Sirius (SIRI) today. The paper thinks the prospect for the marriage may have improved. Some of the car companies are behind it. Some consumer groups back the deal if subscription fees are capped.

The Journal says that the recent rally in the shares of the two companies is a sign that Wall St. likes the chances of the deal much more than it did when the plan was announced in February. But, XM’s stock is below where it was after the deal was announced. That could hardly be called a strong bet by investors.

A lot of members of Congress are against the deal. So is the National Association of Broadcasters. A review of the laws about monopolies probably speaks against the deal more than for it. One satellite broadcast company, protected by a government license, is about as close to a monopoly as it gets.

The stock prices of the two companies are up about 25% in the last three months. But, the reason for that may be less complicated than most on Wall St. think. Each company announced big increases in revenue and subscriptions in the last quarter. They still have piles of debt and still lose money, but they are growing fast and moving closer to breakeven. That, in and of itself , is a good reason for a stock to rise.

This has been under review for 24/7 Wall St.’s Special Situation Investing Newsletter for some time.

Douglas A. McIntyre