When SIRIUS XM was challenging $2.00 in recent weeks and months, our take was that it was going to take a new breed of shareholders to keep driving the stock. We were amazed that a new breed of investors DID emerge and the stock rallied all the way up to $2.44 before the sale started.
Shares are now at $2.05 but that $2.44 peak actually came on May 31, 2011. When you consider that there are two weeks now between reporting periods for NASDAQ short interest you have to figure that the real average short selling came spread out over those days. At the May 13, 2011 reading we had SIRIUS XM shares trading at $2.24.
We took a large chart below to show how SIRIUS XM shares have risen and risen, which means that if the short interest kept rising then the pain from the losses was getting magnified on average every day. At least until now.
| DATE | PRICE | Short Interest | Avg. Volume | Days-to-cover |
|---|---|---|---|---|
| 5/31/2011 | $2.35 | 317,089,214 | 111,928,110 | 2.832972 |
| 5/13/2011 | $2.24 | 289,943,915 | 130,312,558 | 2.224988 |
| 4/29/2011 | $1.99 | 278,421,342 | 52,606,727 | 5.292505 |
| 4/15/2011 | $1.84 | 270,264,848 | 49,249,107 | 5.487711 |
| 3/31/2011 | $1.65 | 265,453,444 | 45,692,602 | 5.80955 |
| 3/15/2011 | $1.75 | 255,399,482 | 50,829,178 | 5.024663 |
| 2/28/2011 | $1.81 | 247,615,861 | 68,418,588 | 3.619131 |
| 2/15/2011 | $1.69 | 250,788,824 | 73,397,167 | 3.416873 |
| 1/31/2011 | $1.62 | 252,054,375 | 38,429,203 | 6.558928 |
| 1/14/2011 | $1.56 | 239,986,902 | 51,658,878 | 4.645608 |
| 12/31/2010 | $1.63 | 213,077,965 | 51,516,146 | 4.136139 |
| 12/15/2010 | $1.39 | 225,721,127 | 43,925,808 | 5.13869 |
| 11/30/2010 | $1.37 | 224,268,205 | 37,168,848 | 6.033768 |
| 11/15/2010 | $1.39 | 212,506,584 | 83,424,139 | 2.547303 |
| 10/29/2010 | $1.50 | 181,575,096 | 56,896,899 | 3.1913 |
| 10/15/2010 | $1.38 | 176,049,267 | 77,579,904 | 2.269264 |
| 9/30/2010 | $1.20 | 176,917,398 | 50,343,702 | 3.514191 |
| 9/15/2010 | $1.11 | 191,693,776 | 75,791,613 | 2.529221 |
| 8/31/2010 | $0.96 | 201,686,069 | 103,551,935 | 1.94768 |
| 8/13/2010 | $1.00 | 184,763,687 | 56,637,058 | 3.26224 |
The common belief is that short sellers are more sophisticated than retail “buy and hold” investors. In many cases that turns out to not be the case. Short sellers can find themselves standing on the streets with their pant-pockets turned inside out. Buy and hold investors can only lose their initial investment in any common stock. Short sellers have unlimited downside. In theory, just pretend that John Malone decided for some reason that he was going to tender the outstanding common stock of SIRIUS XM along with Mel Karmazin and Howard Stern (obviously, just theoretical) at $4.00 per share. That 317+ million shares in the May 31 short interest would translate to losses from that $2.35 share price of more than $523 million. Ouch.
Last weekend’s Top Analyst Calls of the Week showed how Zacks went to a new street-high price target of $2.75. The short sellers obviously don’t care.
JON C. OGG
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