Shares of Sirius XM Holdings(NASDAQ: SIRI) rose 12.7% in October 2024, according to data from S&P Global Market Intelligence. The embattled satellite radio giant reported earnings near the end of the month, but that wasn't the needle-moving event. Instead, the stock gained more than 18% in the first two weeks of last month thanks to the completion of a corporate reorganization.
How Liberty Media restructured Sirius XM's future
This wasn't exactly fresh news. Liberty Media built a dominating 83% ownership 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 that plan was executed in several steps over the summer and early fall of 2024.
The final John Hancock was written on Oct. 9, completing the company's separation from Liberty Media. Owners of the former Liberty/Sirius tracking stock now hold the vast majority of ownership in the revamped Sirius XM company.
Management took the opportunity to share a financial update in the separation announcement. Most full-year targets were simply reiterated, but the free-cash-flow guidance was boosted from $1.0 billion to $800 million. The adjustment was based on closing costs for the restructuring.
And this long-planned move was the reason for Sirius XM's big price gain in October. The third-quarter earnings report that followed on Oct. 29 barely moved the stock. Then again, investors had already seen a preview of those results in the separation announcement's guidance updates.
Financial implications of Sirius XM's new independence
The new Sirius XM is a much simpler stock. At the same time, Sirius XM has seen its revenue growth turn mildly negative over the last two years while trailing free cash flows plunged 41% lower. Will the simpler ownership structure give Sirius XM's leaders the freedom to reimagine its marketing strategy? I don't know. And the whole satellite radio idea is starting to look outdated in this era of increasingly digital entertainment options.
So, the stock trades 54% below its yearly highs today, and I'm still not tempted to start a position. The company has significant interests in streaming media through its namesake service and the Pandora buyout. In a perfect world, I'd love to see the capital-intensive satellite radio business fade out over time while Sirius XM turns its core activities in a cloud-based direction. It needs a complete reboot, far beyond the stock restructuring it executed in October.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
