Wednesday, February 21, 2007

Merger Announced - What's Next

February 21, 2007

Now that the merger has been announced, many investors are likely looking for the bounce in the stock price. As yet, it has not been very substantial. The question is whether or not it will improve as time passes.

First things First

We have the quarterly reports for Q4 2006 due next week, and that is reason enough to hold excitement in check.....at least for the moment. Investors know the synergies of a possible merger, but what is unknown is how long before these synergies are realized, and what the performance of 2006 was. currently investors are awaiting guidance from these companies. this guidance will allow the street to determine how much value is in these companies, and where they stand financially as individual companies. It is only with a clearer understanding of this that the street can begin to assess the premium a merger would bring.

Thus, current guidance is needed

The Naysayers Are Getting Their Two Cents In

As expected, there exists a faction of Naysayers to a merger. Some believe it will not happen, others argue that it shouldn't. These voices will be heard the loudest in the coming days. Thankfully, it is not loud opinions that matter here. It is reasonable thought and the definition of the marketplace that will determine how the merger goes forward. Sure, the street will hedge their merger bets, but as time passes, and things begin to become more clear, people will feel more solid in which way they feel this will go.

Don't Look For A Lot Until Guidance is Clarified and Established

Traders make money off of fast action and news, or the sentiment while news is not yet delivered. Currently there are still a lot of questions in the air. There will be a lot said in the respective conference calls, and investors will be hanging on the the calls, as well as the question and answer sessions. Once these calls are complete, the concentration will shift back to the merger.

Consider The Timing of Events

1. The companies announce a merger.

2. One week later they have their respective quarterly reports.

3. One week later Karmazin will speak to a Congressional Committee.

4. The merger will go before the DOJ and FCC.

While all of this is happening, there will be another auto show, and there will be many studies and reports related to the subject. This merger is going to be on the forefront of the street for quite some time. If it begins to gain steam, the stock prices will begin to react.

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2/21/2007 09:48:00 PM

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  • Could someone explain why SIRI is down big today and XMSR is up? The risks and benefits are equal to both are they not?

    By Anonymous Anonymous, at February 22, 2007 4:07 PM  

  • The terms of the merger are that XM shareholders will get 4.6 shares of Sirius for each share of XM they hold. Because of this, there will be a virtual tie between the prices. As yet, the trading range of both companies does not match the merger ration. Sirius closed at $3.80. 3.80 * 4.6= $17.48. Right now the ratio is a bit over 4 to 1. Personally, I think the street is waiting on the calls next week to see what happens.

    By Blogger SSG, at February 22, 2007 8:42 PM  

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