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Shorts pile into Sirius (SIRI)

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Shares sold short in Sirius Satellite Radio (NASDAQ: SIRI) rose 23.5 million shares to 103 million between October 31 and November 15, according to data from Nasdaq.

Investors appear to be upping the bet that the Sirius merger with XM Satellite (NASDAQ: XMSR) will not go through due to objections from Congress and the FCC. The two companies need the merger to bring down redundant costs. Many in Washington argue that a government sanctioned monopoly in satellite radio will only lead to higher consumer prices.

The reason for short selling in Sirius, however, may be more complex than that. The company's subscriber base is not growing as fast as it once was. Sirius may not be able to do it alone without selling more stock or taking on more debt. Either one would be bad for common shareholders. In the September quarter, Sirius was still losing a lot of money -- $106 million on an operating basis against $227 million in revenue.

Sirius has total liabilities of over $2.2 billion and almost $1.3 billion of that is debt. Even if the company can grow at a rate it has not seen in a couple of years, paying that down is more than a challenge.

Douglas A. McIntyre is an editor at 247wallst.com.

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Last updated: November 26, 2009: 01:10 PM

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