Sirius XM Radio Inc. (NASDAQ: SIRI) is far from a company without controversy.  Yesterday came a company shareholder presentation with growth metrics ahead, but Moody’s lifted its bond ratings, and the report showed yet another gain in the short interest by short sellers.

The first matter of order is that short sellers keep attacking SIRIUS XM. Yesterday marked the short interest report date as of May 13, 2011 settlement date, and that short interest has grown to more than 289.9 million shares short.  This was the fifth consecutive increase in the short interest and is the highest reading in a year.

Mel Karmazin gave a shareholder presentation yesterday.  We summarized the key metrics below:

• The outlook included some $3.0 billion in projected 2011 revenue. a projected $715 million in EBITDA, $350 million in free cash flow, and a growth to 21.6 million total subscribers,
• The company has also shown how its borrowing costs have dropped, with its last bond sale being down to 7.625% on an unsecured basis, down from 9.75% on a secured basis in August 2009.  The new yield is roughly 6.2% as to where the bonds are trading now.  It also has no significant bond maturities until mid-2013.
• As far as net cash after expenses and debt payments ahead, Sirius sees about $707 million at the end of 2011 and about $1.057 billion at the end of 2012.  As far as cash, the company did note that it might consider acquisitions, dividends, or stock buybacks.
• Full presentation here.

We would note that rival Pandora is still too small to even really show up as a SIRIUS XM super-threat.  The problem is that Pandora has filed for an IPO and it remains one of the top-watched stocks on the private market of SecondMarket.

The other issue is the credit rating upgrade from Moody’s, where SIRIS XM saw its credit rating go from B3 to B2 and the ratings agency also raised its probability of default rating from B2 to B1.  These are still far from investment grade but the trend for credit ratings has risen and risen.

When SIRIUS XM hit $2.00, we opined that it was going to likely take a new class of shareholders to keep buying the stock up higher and higher.  Many of the growth metrics were already priced or at least already accounted for when shares went from $1.00 to $1.50, and then to $1.75, and then to $2.00.  Now shares are at $2.32.

It seems that the reason SIRIUS XM keeps rising is that the new shareholders are buying into the growth story more than we and more than others expected.  Growth is hard to come by and the reality is that it is impossible to argue that SIRIUS is one of the top media subscriber services in the country. SIRIUS XM remains a battleground stock.  At $2.32, its 52-week trading range is $0.88 to $2.42.

JON C. OGG

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