Sirius XM Holdings (SIRI) began trading on the Nasdaq (NDX) under the ticker symbol “SIRI” on September 10,2024 following the completion of its merger between Sirius XM Holdings, an audio entertainment company, and Liberty Sirius XM. Liberty Sirius XM is a tracking stock group under John Malone’s Liberty Media. The newly consolidated company will continue to operate under the Sirius XM brand, streamlining its ownership structure and simplifying operations.
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What Is a Tracking Stock?
For those unfamiliar, a tracking stock is a special type of equity offering issued by a parent company that reflects the financial performance of a specific business segment. Importantly, it trades separately from the parent company’s stock, allowing the company to highlight the performance of a high-growth segment.
Changes in SIRI’s Ownership Structure
Moving on to the ownership changes, as of July 31, Liberty Media, led by Chairman John Malone and President and CEO Greg Maffei, owned 83% of Sirius XM. This long-anticipated merger was first proposed by Liberty in September. With the merger now complete, “New Sirius” has emerged as an independent, publicly traded entity, officially renamed Sirius XM Holdings.
Following the merger, Sirius XM Holdings now has 339.13 million shares of outstanding common stock. Additionally, former Liberty Sirius XM stockholders will own around 81% of the new company, while former Sirius XM minority stockholders will hold the remaining 19%.
SIRI Expects Operational Benefits from the Merger
From an operational standpoint, the merger is expected to simplify Sirius XM’s ownership structure, enhance trading liquidity, and broaden its investor base. In addition, the company’s board will now have a majority of independent directors, which could impact future decision-making.
Sirius XM Reaffirms Financial Outlook for FY24
Looking ahead, SiriusXM has reaffirmed its FY24 outlook, projecting $8.75 billion in revenue, $2.7 billion in adjusted EBITDA, and $1 billion in free cash flow. The company’s CFO, Thomas Barry, emphasized the company’s focus on business investment and reducing its leverage to a mid-to-low three times its adjusted EBITDA.
SIRI Maintains Dividend and Approves Stock Buyback
Moreover, as part of its financial strategy, Sirius XM will maintain its quarterly dividend, adjusted to $0.27 per share following the 1-for-10 adjustment in the Liberty Media transaction exchange ratio.
Alongside this, the board approved a $1.166 billion stock repurchase program, continuing its long-standing buyback plan. Additionally, Sirius XM will assess its goodwill and intangible assets from the merger, with the analysis expected to be completed in Q3 2024.
Merger Results in a 1-for-10 Stock Adjustment for SIRI
It is important to note that, as part of the merger’s terms, each share of Sirius XM common stock held by minority stockholders before the transaction has been converted into one-tenth of a share. For example, an investor holding 100 shares at the previous closing price of $2.67 on Nasdaq would now receive 10 shares of the new Sirius XM common stock.
Is SIRI a Good Stock to Buy?
Analysts remain sidelined about SIRI stock, with a Hold consensus rating based on four Buys, three Holds, and two Sells. The average SIRI price target of $37.11 implies an upside potential of 35.5% from current levels.
