Is it better to buy shares in XM satellite radio since I will receive Sirius shares after the merger?

Question

I have heard that XM stock holders will recieve 4.6 shares of Sirius stock after the merger. Because of that is it better to buy stock in XM radio since I will pretty much receive free shares from Sirius? Then again isn't XM the one that is most likely to go bankrupt? Should I just stick with my sirius shares?

Answer 1

What you are leaving out of this equation is the stock price.

As of today

4.6 shares of Sirius = $8.832

1 share of XM = $7.67

If the merger went through today you would make $1.162 for every share of XM you own based on current valuations.

If the merger does not go through than you will be holding XM stock. So, it all depends what your strategy is. Do you feel the merger will be approved? If so, XM would be the way to go right now.

Answer 2

it doesn't matter.  right now, both stocks are trading like the merger has already happened.  ultimately, though, i doubt the FTC will allow the merger, so the better bet might be whichever one you think will be in the event that the merger falls through.

Answer 3

If XM stock holder recieve 4.6 shares then it would better to have XM stock.. However, if XM does not cooperate and Sirius does a hostage take over than you were better off with the sirius stock... I would just stick with your sirius shares