Sirius XM Radio Inc.’s shareholders approved proposals to issue up to 3.5 billion more shares and enact a reverse stock split, an effort by the satellite-radio company to pay down debt and shore up its battered stock price.
Shareholders, who have watched the stock crumble amid concerns about the company’s subscriber growth potential and its ability to repay debt, gave the board the right to split its common shares by a ratio of between 1-for-10 to 1-for-50 by the end of next year.
Sirius shares rose a penny to close at 14 cents Thursday on the Nasdaq Stock Market. The stock has traded below $1 since mid-September, but due to the recession, Nasdaq has temporarily set aside a rule that would have threatened companies like Sirius with delisting for its low stock price.
At a meeting in New York Thursday, shareholders gave the company the right to increase the number of authorized shares of common stock to eight billion from 4.5 billion.
Sirius has about $1 billion in debt due to mature in 2009, with the first portion due in February, and may sell stock to pay the obligation if it is unable to refinance.
The reverse split plan could shrink the number of outstand ing shares to a range of 65 million to 320 million shares from the current 3.2 billion shares.
At the meeting, the company also said it will have trimmed 22% of its work force by year end in an anticipated cost-cutting effort. Sirius expects the job cuts and other cost-reduction measures to save $425 million next year.
Sirius Chief Executive Mel Karmazin noted that November car sales fell 37%, the weakest results in nearly three decades. Sirius sells its service through cars pre-installed with its radios and individual subscriptions.
The company forecast a smaller-than-expected adjusted loss of $200 million this year, down from $300 million as previously expected. For the fourth quarter, Sirius expects to post an adjusted loss of $32 million.
For 2009, Sirius reaffirmed its expectation for adjusted profit of $300 million. But its number of subscribers is forecast to rise to just 20.6 million — below the 21.5 million that Sirius forecast in September, before the Detroit automakers asked Congress for emergency loans.
Sirius also reaffirmed revenue forecasts of $2.4 billion this year and $2.7 billion in 2009. Analysts polled by Thomson Reuters are forecasting $2.2 billion in revenue for this year, but are in line with management’s prospects for 2009.