Why Sirius XM shares rose in October

Shares Sirius XM Holdings (SIRI -6.22%) according to data, in October 2024 grew by 12.7% data from S&P Global Market Intelligence. The embattled satellite radio giant reported earnings near the end of the month, but it wasn’t a game-changer. Instead, shares rose more than 18% in the first two weeks of last month thanks to the completion of a corporate reorganization.

How Liberty Media Restructured the Future of Sirius XM

This wasn’t exactly fresh news. Liberty Media have acquired a dominant 83% stake in Sirius over the years, starting with a financial rescue mission in 2009. Sirius and Liberty announced their intention to restructure the company’s ownership in September 2023, and the plan was implemented in several phases throughout the summer and early part of the year. autumn 2024.

John Hancock’s final version was written on October 9, completing the company’s separation from Liberty Media. The owners of the former tracking company Liberty/Sirius now own the vast majority of the shares of the revamped Sirius XM.

Management took the opportunity to share financial news in the separation announcement. Most of the goals for the whole year were simply confirmed, but free cash flow the forecast was increased from $1.0 billion to $800 million. The adjustment was based on the costs of closing the restructuring.

And this long-planned move was responsible for Sirius XM’s big price increase in October. The third quarter earnings report that followed on October 29 left the stock little changed. Again, investors have already seen a preview of these results in the guidance updates on the split announcement.

Financial implications of Sirius XM’s new independence

The new Sirius XM is a much simpler stock. At the same time, Sirius XM’s revenue growth has turned modestly negative over the past two years, and its residual free cash flow has fallen 41% lower. Will a simpler ownership structure give Sirius XM executives the freedom to rethink their marketing strategy? I don’t know. And the whole idea of ​​satellite radio is starting to look outdated in an increasingly digital age. entertainment parameters.

So today the stock is trading 54% below its yearly highs and I’m still not tempted to take a position. The company has significant interests in streaming media through the service of the same name and the redemption of Pandora. In an ideal world, I’d like to see the capital-intensive satellite radio business disappear over time while Sirius XM moves its core business to the cloud. It needs a complete reset that goes well beyond the share restructuring carried out in October.