Wednesday, December 14, 2005

Even Dylan doesn't move XM

At 8am yesterday, 12/13, the story crossed on PR Newswire---Bob Dylan to DJ one hour show each week on XM radio. In a positive day for the market, XMSR was flat. Contrast that with the fact that the mouth of Long Island, Howard Stern, seems to have meaningfully moved up rival Sirius radio over the last few months. Granted, Stern will be on every day for several hours, but is that a positive. How out of it am I?

A few facts: Subscribers-- XMSR 6mm, SIRI 3mm; 2006 projected sub growth rate--X--50%, S--65%; market cap--X 6.6 billion, S 9.3 billion; one year stock price perf.---X (23%), S(12%); 6 month stock perf.--X(6%), S +14%. What explains this. In an interview on CNBC, the CEO of XM was asked this question and explained that because S has many more shares floated and therefore had a much lower nominal stock price than X(S around $7, X around $30)that S was the beneficiary of more retail demand. My immediate thought was "this guy doesn't have a clue about finance and what drives stock prices". But I looked. S is 33% institutionally held(very low) while X is 95% institutionally held(very very high). In the third quarter Fidelity, Legg Mason, Alliance, Janus, Wellington Boston, and Delaware Inv.(strange for a dividend shop) all added to their already large holdings in X(all over 2% , some well over). The only non-index, non private equity, instl investor in S with a more that 2% position was Oppenheimer Global Fund. Conclusion--see part 2 next.


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