Sirius XM Holdings announced a 1-for-10 reverse stock split for its shareholders when it merges with Liberty Media's SiriusXM Group watch later this year, sending the streaming and satellite radio company's stock up 4.5% on Tuesday (18 June).
The stock split, which was announced in a filing on Sunday (June 16), is intended to reduce the total number of shares and boost SiriusXM's stock price. The Nasdaq-listed company has seen its share price fall more than 65% from its 52-week high of $7.95, leading the Nasdaq to cast SiriusXM than the Nasdaq-100 last Thursday (June 13).
The stock split and the combination of the two publicly traded companies into a new SiriusXM stock — a deal expected to close in the third quarter — are financial tussles aimed at improving value for investors, executives said.
SiriusXM is trying to gain ground in the streaming market with the launch of its new phone-based streaming app, which executives say offers a wider range of customized content for users. The app is also an attempt to reduce the company's reliance on customers signing up through their vehicles.
Investments in the app, however, have been costly, and SiriusXM has announced two separate rounds of layoffs in the past year or so.
The stock split will help reduce the drawdown that came from the company issuing shares to raise money, he says David Schulhof, founder of music stock company MUSQ.
“The company faced some headwinds in the advertising and automotive markets and also raised a lot of money to grow its music streaming service to compete with the likes of Spotify,” says Schulhof.
“But that's where they really need to go,” he adds. “With 87% of all music consumption dominated by streaming, they really needed to figure out a streaming strategy quickly.”
The company hopes the revamped app, which launched in December and costs $9.99 a month, will attract new subscribers and drive revenue growth.
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