Short Sellers Keep Adding and Getting Killed in SIRIUS XM (SIRI)

Sirius XM Radio Inc. (NASDAQ: SIRI) has managed to amaze and dazzle on its share price performance.  We were concerned that it would take a whole new host of shareholders to drive the shares up higher after the stock reached the $2.00 threshold.  That appears to have happened and at a rate that is almost baffling.  This stock keeps rising, so why do short sellers keep increasing their bets against the company?

The end of April short interest has hit yet one more near-term high and we have seen four twice-monthly increases in a row in the short interest.  The April 29 settlement date showed a whopping 278,421,342 shares listed in the short interest.

We saw the prior reports in a most recent first as follows for the short interest: 270.2 million shares, 265.4 million shares, 255.4 million shares.

The only real issue worth noting is that the increases seen so far are not really massive.  The days-to-cover ratio was slightly lower at 5.29 versus 5.49 in mid-April and versus 5.81 at March-end.

It is easy to say that Sirius XM is ‘overvalued’ and it is easy to call it a cult stock.  The problem is that short sellers can get killed time after time when solely betting on or against ‘value.’  That is particularly the case when it comes to low-priced cult stocks.

SIRIUS XM Radio Inc. (NASDAQ: SIRI) closed at $2.35 on Tuesday and the 52-week range is $0.88 to $2.36.  For the short selling to keep increasing like this, the implied static value would have been based upon a $1.99 price.  Close to another $83 million or so has been lost in this short selling activity if it has remained in force since the end of April.

JON C. OGG